Media entrepreneur Byron Allen says he wants to buy Paramount for $14.3 billion.
Wall Street doesn't believe it — it thinks the company isn't worth more than $10 billion.
Who wants to buy a big TV company these days, anyway?
Allen Media Group says it wants to buy Paramount — the media conglomerate that owns CBS, cable channels like MTV and Comedy Central, and the legendary movie studio behind hits like Top Gun — for $14.3 billion.
But Wall Street doesn't think that's going to happen.
On Wednesday, the day after news of the bid broke, Paramount shares went up. But investors still think it's worth less than $10 billion — meaning they don't think Allen Media is really going to end up owning Paramount. Or, at least, paying that much for it.
What's going on?
One answer may simply be skepticism about Allen Media Group and its owner, TV personality-turned-entrepreneur Byron Allen. Allen's company owns several media assets, including the Weather Channel television network and some local TV stations. But at this point, he may be best known for publicly making offers for big assets in deals that never pan out. Among them: ABC, BET, and the Denver Broncos.
And while Allen's people have told Bloomberg and The Wall Street Journal that they have financing lined up for the deal — which would end up costing closer to $30 billion in order to pick up Paramount's long-term debt — there will be real skepticism about Allen's capacity to pay that much until he explains where the money is coming from. (Allen Media Group didn't immediately respond to an emailed request for comment.)
But another reason could be more basic: Who wants to pay a premium for Paramount?
Reminder: At one point, Paramount's TV operations were dominant players in cable TV and broadcast TV. But those industries appear to be in permanent decline, and the companies that own broadcast and cable TV assets are in an expensive and difficult transition to the internet.
And while conventional wisdom has predicted that medium-sized media companies like Paramount will get swallowed up by bigger players like Comcast or Warner Bros Discovery, those deals have yet to materialize. (When news broke last year that WBD CEO David Zaslav had talked to Paramount CEO Bob Bakish about a possible merger, investors signaled their disapproval by knocking down the share price of both companies.)
Meanwhile, well-capitalized tech companies with streaming businesses like Apple and Netflix have made it clear that while they might be interested in acquiring studios that make movies and TV shows, they don't want any part of conventional TV networks. (It's also hard to see regulators signing off on a deal like that, given the Biden administration's antitrust stance.)
Which means Paramount and every company with a big TV operation is in real trouble at the moment. "The situation in US media has increasingly progressed from challenged to desperate, leaving management teams to consider commensurately desperate measures," MoffettNathanson analyst Robert Fishman dryly noted in a note Wednesday.
Result: Except for a pandemic-era blip, Paramount's share price has been declining since late 2019, when owner Shari Redstone formed the company by merging CBS and Viacom. Back then, the company was worth around now $40 a share; now it's around $15.
Paramount may still end up changing hands at some point — the reason the stock is up in recent weeks is because David Ellison, a movie producer who's the son of Larry Ellison, one of the world's richest men — has been looking to buy it, and other potential acquirers are floating around.
But no one, to date, has suggested that Paramount is worth anything close to $14 billion. The fact that Allen does is a real head-scratcher.
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