Paramount CEO Bakish Out Amid Merger Talks, Stock Falls

Key Takeaway

• Paramount Global plans to dismiss CEO Bob Bakish amid merger talks with Skydance and potential counterbids from Sony and Apollo.
• Paramount's stock has halved over the past year, facing financial struggles and shareholder opposition to the Skydance deal.
• The company's future is uncertain, with leadership changes, potential legal challenges from shareholders, and fluctuating share prices.

Leadership Uncertainty

Paramount Global is reportedly preparing to dismiss CEO Bob Bakish amid ongoing merger discussions with Skydance Media and anticipation of a counterbid from Sony and Apollo. Bakish, who has been with Paramount and its predecessor Viacom for over two decades, has faced disagreements with Shari Redstone, Paramount's controlling shareholder, particularly over the Skydance offer. This offer has been criticized by common shareholders for favoring Redstone at their expense. The expected departure of Bakish adds to the challenges faced by Paramount, a company with a rich history in Hollywood, as it navigates financial difficulties and a competitive market against giants like Netflix.

Financial Struggles and Strategic Moves

Paramount has seen its stock valuation halve over the past year to about $8 billion, amid investor concerns over the company's future. The company is losing billions on its streaming service and grappling with the decline of television channels. In a complex deal, Skydance CEO David Ellison aims to acquire National Amusements, which holds a significant portion of Paramount's voting shares, and subsequently merge Skydance with Paramount. This proposed structure has faced opposition from some shareholders, leading to threats of legal action. Paramount's board is also seeing changes, with four members not seeking re-election.

Potential Bids and Market Reaction

The company is at a critical juncture, with exclusive discussions with Skydance expected to conclude soon, and a potential joint offer from Sony and Apollo on the horizon. The structure of Apollo's bid, possibly involving Legendary Entertainment, is still under consideration. Analysts have raised concerns about regulatory approval for a Sony and Apollo acquisition. Amid these developments, Paramount's shares have fluctuated, reflecting market speculation and uncertainty about the company's direction and leadership.

Street Views

• John Rogers, Ariel Investments (Neutral on Paramount):

  "A deal that favours Shari at the expense of the rest of us [is] extremely problematic. It does feel like a company in disarray."