Paramount Global (NYSE: PARA)

[SalvorHardin]

I was in the early stages of doing a writeup on the film and television company Paramount Global (the home of Star Trek and Yellowstone), around which there has been a lot of media speculation and which I believed was a decent punt. Turns out that overnight things have changed quite dramatically as Bloomberg is reporting that a bid has come in for the company from media mogul Byron Allen.

Bloomberg is a pretty reliable source; if it was just the entertainment press reporting this I would take it with the proverbial pinch of salt. Bllomberg is also reporting that Mr. Allen has already received offers for some of Paramount Global's assets, so it is quite possible that other bidders will crawl out of the woodwork in the next couple of weeks and there will be a bidding war.

Bloomberg says that the offer is $21.53 for the non-voting shares (PARA, they closed last night at $13.68) and $28.58 for the voting shares (PARAA, closed at $19.19, PARAA shares are much less liquid than the non-voting shares). It’s being reported as a $30 billion offer, a figure which includes the debt.

https://www.bloomberg.com/news/articles/2024-01-31/byron-allen-makes-14-billion-offer-for-all-of-paramount-global

https://seekingalpha.com/news/4060408-byron-allen-makes-14b-offer-for-paramount-global-bloomerg

https://variety.com/2024/biz/news/byron-allen-paramount-global-allen-media-group-1235892590/

This could set of a wave of consolidation in the industry. Streaming video has not proven to be the huge success for many legacy media companies
that it was first thought to be, whilst it has driven up costs. I wouldn’t be in the least bit surprised if a bidding war breaks out, given that there were serious rumours about several companies who were interested in buying some or all of Paramount Global, whilst Apple was in talks about bundling its streaming service Apple+ with Paramount.

Anyway I’m holding onto my PARA shares (about 4% of the portfolio as of last night, bought last week) and I will be having a look at other media companies (particularly Lions Gate Entertainment, producers of the Hunger Games and John Wick series).

Berkshire Hathaway owns 14% of Paramount Global (non-voting shares), bought at much higher prices. There are a lot of “stale bulls” who own shares, back in March 2021 the shares almost reached $100 when Bill Hwang’s Archaegos Capital heavily bought into Paramount Global, driving up the price, before margin calls forced the sale of his stake (Hwang is currently facing fraud charges).

It’s quite possible that there will be a bit of a short squeeze as last night’s short interest was 16.2%.