Is Byron Allen’s Paramount Bid the Real Deal?

Is Byron Allen’s $30 billion bid (inclusive of debt) the real deal? Wall Street isn’t sure. Paramount stock ended Wednesday up 6.7 percent to $14.59, a sizable jump on a day when the overall market was down, but well below Allen’s bid for the company at more than $21 per share.

It’s a sign the market is waiting to see Paramount’s next move.

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Allen has been in the mix for many deals over the years: BET, ABC, TEGNA’s TV stations, Scripps TV stations, the Denver Broncos, the Washington Commanders.

None of those deals, however, came to fruition, though in many cases it was the sellers that got cold feet (see Bob Iger’s oscillating view on whether ABC is a “core” part of Disney’s business).

Allen has gotten deals over the finish line, of course. He forged a $300 million deal for The Weather Channel in 2018; he’s been a buyer of local TV stations from Gray TV and others over the years; in 2022 he cut an opportunistic deal to buy the Black News Channel.

As a media mogul with Murdochian ambitions, Allen has made no secret of his desire to grow through M&A.

Over lunch of grilled fish and Mediterranean platters at Avra Restaraunt in midtown Manhattan in April (it’s his favorite spot in New York, order the baklava for dessert), Allen told an assembled crowd of media buyers and advertisers that he is not complacent.

“We plan to buy more [local TV stations], we really like that. We’re going to buy more cable networks,” Allen said. “We’re very acquisitive. We’re going to buy whatever we can that makes sense. I will say we are truly aggressive when it comes to acquisitions. If it’s for sale — if it’s a lemonade stand — we want to buy it. It has to have a video monitor, it just can’t be lemonade, it has to have a video monitor so we can program that.”

Allen loves linear TV at a time when it has fallen out of favor. Everyone else is investing in streaming, hoping to use linear cashflow to subsidize streaming. Warner Bros. Discovery, which held very early talks about a merger with Paramount, is one of those companies, though regulators would likely have issues with that merger if it was proposed.

Netflix is always poking around at what’s available, but as co-CEO Ted Sarandos said on the company’s last earnings call: “We’re not interested in some of the big linear assets that may or may not be available.”

“While investors were initially skeptical Allen’s offer can be financed, we think he wants the linear assets and there are ample buyers for the Studio/content,” Wells Fargo analyst Steven Cahall wrote Jan. 31. “This increases the probability something comes together, which will keep shares elevated.”

Paramount has no shortage of linear cable channels that have been under-programmed for years, it also has a crown jewel in CBS, the home of the NFL, The Masters, CBS News and other valuable programming. The cashflow from those assets, combined with a judicious approach to cost management, could keep the business afloat, at least in theory.

Cahall estimates that if Allen sells the Paramount studio and lot, as well as any other assets “that interested parties like Skydance likely want,” Allen could fetch some $15 billion, meaning that if he pursues sales, the financing would be more manageable. The prime Los Angeles real estate and the treasure trove of IP would likely find multiple bidders.

“Investors have viewed Allen’s prior Media M&A offers as longer shots due to financing. However, those deals didn’t always have willing sellers,” Cahall adds, noting the BET and ABC offers. “NAI is in talks for a sale.”

“We think Paramount should immediately take this deal, as it represents >50% premium to yesterday’s close, which is likely an acceptable premium for the majority of Paramount’s shareholders,” wrote KeyBanc Capital Markets analyst Brandon Nispel.

But other analysts are skeptical, both of the offer, and of the potential to turn around a contracting linear TV business.

“In placing a bid for Paramount, Mr. Allen is seeking control of a company with increasingly challenged fundamentals,” MoffettNathanson’s Robert Fishman wrote Jan. 31. “By assuming the totality of the company’s debt, he could run the risk of triggering change of control covenants. Mr. Allen reportedly would seek to sell Paramount’s studio, among other assets, and focus on running the company’s linear networks and streaming service, Paramount+, in a more efficient manner, to which we wish him the best of luck!”

Allen, who launched his Hollywood career as a stand-up comic and still performs, has also shown a willingness to get creative with his dealmaking, and to act opportunistically when something arises.

Just look at his moves in syndicated TV.

Allen’s company has become the dominant player in the daytime court show genre after WarnerMedia canceled Judge Mathis and The People’s Court. Allen hired both Greg Mathis and People’s Court star Marilyn Milian, recalling how when Mathis texted him about having Allen’s people reach out to his people “I called him up and I said, ‘Greg, I am my people.’”

Allen’s deal with Mathis was announced the same day news of his prior show’s cancelation leaked.

Paramount is a multibillion dollar company, not a syndicated TV series, but the door is open, and other interested parties are circling, including some that may not have interest in linear.

It’s not clear who Allen’s partners are in the bid, or how buttoned-up the financing is. But his aspirations to become a media titan are well known, and Paramount’s assets could be just the thing to push him over that line.

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