Paramount Global (PARA) – Get Free Report shares soared in early Wednesday trading after the media mogul Byron Allen, a former Hollywood star, made another play for the streaming and entertainment group.
Paramount shares have risen nearly 30% over the past three months, taking their market value to around $9.1 billion, following reports of both interest from Allen Media Group and talks that would combine its streaming services with Apple (AAPL) – Get Free Report.
Byron Allen and Jennifer Allen at the “Hostiles” Premiere at the Academy of Motion Picture Arts and Sciences in Beverly Hills, Calif., on Dec. 14, 2017. Byron Allen has built a media empire.
That move followed reports of similar talks between Netflix and Comcast (CMCSA) – Get Free Report-owned Max, through a deal with Verizon (VZ) – Get Free Report. And it comes as streaming services look to win back customers who have weathered sharp price increases across all major hubs over the past year.
Paramount in fact cautioned investors in November that a slump in ad sales and intensifying competition would clip its fourth-quarter earnings. It posted weaker-than-expected profit of 39 cents a share on revenue of $6.92 billion for the three months ended in October.
Byron Allen has built a media empire
Allen, a former television personality who has built a sprawling media empire including ownership of the Weather Channel, is also said to have made a bid in September to buy Disney’s (DIS) – Get Free Report ABC television network, as well as other linear cable assets, for around $10 billion.
Against that backdrop, multiple media reports suggest Allen Media Group has offered $28.58 each for the voting shares of Paramount and and $21.53 per share for the nonvoting Class B shares. Such a deal would value the group’s equity at $14.3 billion.
The overall enterprise value of the deal, which would include debt outstanding, is pegged at $30 billion.
“We think Paramount should immediately take this deal, as it represents >50% premium to yesterday’s close, which is likely an acceptable premium for the majority of Paramount’s shareholders,” said KeyBanc Capital Markets analyst Brandon Nispel, who also notes the appeal of a likely all-cash offer.
Nispel also notes that while Paramount’s controlling shareholder, Shari Redstone, may balk at the $14 billion offer from Allen Media, a counteroffer from Warner Bros. Discovery (WBD) – Get Free Report could create a bidding war for the group. But he cautioned that a share-based deal could be challenging.
“Warner Bros. Discovery has been reported to be interested in offering an all-stock transaction, which would likely be less appealing to Paramount due to potential variability of the value of the equity as well as regulatory uncertainty,” he said.
Paramount Global shares were marked 14.8% higher in premarket trading, on volume of more than 6.3 million shares, to indicate an opening bell price of $15.70 each.