Despite the potential sale of Paramount Global, controlling shareholder Shari Redstone expressed confidence in the new management structure and hinted at further cost cuts at the start of the company's annual investor meeting on Tuesday.
Paramount executives declined to answer questions about sale talks with David Ellison's Skydance Media, which have accelerated in recent days.
A special committee of Paramount's board of directors approved the deal, giving investors the option to sell or hold on to their shares, betting on Mr. Ellison's ability to turn around the storied media giant, according to people familiar with the negotiations.
The Skydance deal still requires approval from Mr. Redstone, who is considering whether to sell his family's stake in Paramount.
But with a sale taking months to complete, Paramount's recently established “Office of the CEO” — comprised of division heads George Cheeks, Brian Robbins and Chris McCarthy — has developed a “going forward” strategy to run Paramount as an independent company and improve its ailing balance sheet. The trio took the helm of Paramount in late April following the firing of Bob Bakish, who had led the company since its merger with CBS at the end of 2019.
The three announced a plan centered around $500 million in cost-cutting (including an undisclosed number of job cuts), asset sales and exploring a joint venture for the company's streaming service, Paramount+.
“We all agree that Paramount is not where we want it to be,” McCarthy said in prepared remarks.
“Given our assets, our talent and our long-term competitive advantage in creating the biggest, most broadly successful hits, we know we can unlock significant value,” McCarthy said.
The shares were down about 3 percent to $12.34 in midday trading on Tuesday. They had risen on Monday after reports that Ellison was close to a deal with Skydance, which would include participation from RedBird Capital Partners and private equity firm KKR.
Paramount has stumbled in recent years.
Once an entertainment giant, the Redstone family-run company has fallen behind traditional rivals such as Walt Disney and Comcast, as well as tech upstarts such as Amazon and Netflix.
Years of underinvestment, mismanagement, dramatic shifts in viewer behavior, the coronavirus pandemic and heavy investment in streaming have eroded the company's position. Once-booming cable channels like Comedy Central, MTV and Nickelodeon have seen their reputations and ratings fall. Compounding the debt woes was Bakish's missed opportunities to sell assets like Showtime and BET.
Last year's strike by the Writers Guild of America and the Directors Association of America (SAG-AFTRA) delayed the content pipeline.
S&P Global downgraded Paramount's credit rating to “junk” status earlier this year. Investor Warren Buffett fled, selling the stock at a loss. Last month, he admitted that buying 63 million Paramount shares was a mistake.
Paramount's 44-minute shareholder meeting saw several investor proposals rejected, including clarification on the use of artificial intelligence and limiting golden parachutes for key executives.
Six directors were re-elected to oversee the company.
In addition to Redstone, Directors Linda M. Griego, Barbara M. Byrne, Judith A. McHale, Charles E. Phillips Jr. and Susan Schuman returned to the Board for one-year terms. Four other directors retired.
The austerity measures come after several rounds of cost-cutting and previous asset sales, including the sale of publishing giant Simon & Schuster and CBS real estate, including Manhattan skyscrapers and the Studio City film and TV site.
“Our plan starts with transforming streaming, which will accelerate our path to monetization and offset the decline in our linear business,” Cheeks said in prepared remarks.
“By streamlining our organization, we will be able to reduce non-content costs and build a leaner, more agile company that is better positioned to win,” Cheeks said, adding that the team has already “identified near-term cost-savings opportunities with an annualized impact of $500 million” in the effort to return Paramount to investment-grade status.
Despite the turmoil and the gravity of the decisions ahead that will determine the fate of the company, Redstone sounded determined in brief remarks. He voiced his support for the three executives currently running the company.
McCarthy was the longtime head of MTV Entertainment Studios and more recently Showtime, Cheeks was CEO of CBS for four years, and Robbins has run both Nickelodeon and Melrose Avenue Paramount Pictures since 2021.
“While we understand this is not a traditional management structure, we believe it will enable us to rapidly implement best practices across the company and drive improved performance,” Redstone said.
“These three people have been behind some of our greatest successes over the years,” she said.
Skydance Media founder David Ellison wants to buy Paramount.
(Evan Agostini/InVision/The Associated Press)
On the deal front, Ellison's attractive proposal marks the latest and third from Skydance and its backers.
The deal includes $4.5 billion to buy out non-voting Class B shareholders in a second phase of the deal at $15 a share, as well as a $1.5 billion cash infusion to shore up Paramount's balance sheet and reduce debt, according to people familiar with the matter.
Redstone was presented with details of the plan this week.
She has long supported the Ellison deal over a sale to Sony Pictures Entertainment or Apollo Global Management, but had to remain on the sidelines while Paramount's independent directors, led by Phillips, worked out a deal that also protected the interests of non-voting public shareholders.
Skydance's proposal would give the Redstone family more than $2 billion in voting stock in holding company National Amusements Co. and Paramount Inc. The cash infusion would allow the Redstones to repay National Amusements Co.'s debt and have about $1.8 billion in hand, said a person familiar with the matter who declined to comment.
