Paramount (PARA) stock fell nearly 10% on Thursday after surging 15% a day earlier on reports that the company had entered exclusive merger talks with David Ellison's Skydance Media.
According to one media mogul, the timing of the debate couldn't have been worse.
“First of all, this is the worst time in the world to sell this,” IAC chairman and Fox founder Barry Diller said in an interview with CNBC on Thursday. “It's actually a great candidate to pivot, but the idea that we should sell it? No matter who comes into it, no matter what kind of base it gets, there's a huge amount of work that has to be done. ”
Paramount is in exclusive talks with Skydance after rejecting a $26 billion all-cash offer from private equity firm Apollo that included $14 billion worth of debt for the entire company, according to reports from the Wall Street Journal and Bloomberg. Has entered. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)
Paramount is bleeding money from its streaming business. Although losses narrowed, the company still reported a direct-to-consumer (DTC) loss of $490 million in the fourth quarter. It's also been plagued by plummeting terrestrial TV revenues as more consumers cut the cord.
Paramount has undertaken a variety of cost-efficiency plans to combat declining sales, including layoffs, restructuring, price increases and even an unexpected dividend cut. However, a potential sale has been under consideration for several months.
Skydance is pursuing a two-step deal targeting Paramount's holding company, National Amusements (NAI). Shari Redstone currently serves as NAI President. She is also the controlling shareholder of Paramount Global.
National Amusements owns approximately 10% of Paramount's capital value and maintains 77% of the voting stock, valued at approximately $1 billion.
According to the publication, Redstone and Ellison have agreed to terms that will allow Skydance to purchase a controlling stake in Redstone. Skydance will then merge its production studios with Paramount's studios, but this is a key contingency to the deal and must first be approved by Paramount's committee of independent directors. It's unclear what Mr. Ellison plans to do with the rest of the company.
Wall Street analysts remain skeptical that the Skydance deal will reach the finish line.
“The more complex the deal, the less likely it is that a deal will be reached,” Needham analyst Laura Martin told Yahoo Finance. She said, “Skydance is about two different pieces of her work…it feels complicated.”
TD Cowen Managing Director Doug Creutz agreed, telling Yahoo Finance, “Buying NAI would give someone control of Paramount. [it] It won't necessarily help current Paramount shareholders. ”
Paramount has long been considered a potential acquisition target, primarily because of its small size compared to its competitors. The company's current market cap is only about $8 billion, compared to Disney (DIS)'s market cap of $218 billion and Netflix's (NFLX) market cap of $273 billion.
alexandra canal I'm a senior reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, Email alexandra.canal@yahoofinance.com.
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