What's next for Paramount after demise of Skydance merger
What cost-cutting measures has Paramount announced in response to the failed merger and what are the expected impacts of these measures?
In response to the failed merger with Skydance Media, Paramount Global announced a sweeping restructuring plan that includes $500 million in annualized cost cuts1. This plan was unveiled by the company's top executives, who now lead the company after the exit of former CEO Bob Bakish. The cost-cutting measures are expected to include layoffs, exploration of potential asset sales, and partnerships with competitors for streaming joint ventures.
The aim of these measures is to bolster revenue, reduce costs to strengthen the company's balance sheet, and accelerate the path to profitability. The company's controlling shareholder, Shari Redstone, endorsed the co-CEOs and their plan to better capitalize on the company's wealth of content.
The announcement of these cost-cutting measures came as Paramount's shares dropped by 4.4% to close at $12.24. The company's shares are down 17% this year. The cost cuts and potential asset sales are expected to set the company up to deliver consistent earnings growth and return the company to investment-grade metrics over time6.
What were the main reasons behind Shari Redstone's decision to end the merger talks with Skydance Media?
Shari Redstone's decision to end the merger talks with Skydance Media was influenced by several factors. Among the main reasons were concerns over legal risks and the potential for shareholder lawsuits, as well as disagreements over deal terms and the allocation of money to different stakeholders. Additionally, the Redstone family's desire to maintain control over their media empire and honor their late patriarch's legacy played a role in the decision. The family initially expected around $2 billion for National Amusements Inc. (NAI), which owns 77% of Paramount's voting shares. However, the deal was restructured to provide more money to common shareholders, which would have left the family with about $1.7 billion after NAI's debt was paid. This reduction in the payout to the Redstone family is believed to have contributed to Shari Redstone's decision to end the merger talks.
How did the market react to the news of the cancelled merger between Paramount and Skydance?
The market reacted negatively to the news of the cancelled merger between Paramount and Skydance. Shares of Paramount fell about 8% after the decision became known to the public. Investors and industry executives were reportedly surprised and critical of Shari Redstone's decision to end the talks, as the deal seemed to be far down the road. The merger's collapse has raised questions about the future of Paramount, with cost-cutting measures and potential asset sales now on the table.