Paramount Global's months-long infighting came to light Monday when CEO Bob Bakish was ousted and pressure mounted for the company's directors to accept (or reject) a takeover bid from David's Skydance Media Ellison.
Moments before the company announced its first-quarter earnings, Paramount issued a statement announcing Bakish's departure. The company said three of its top entertainment executives would lead the company: Paramount Pictures CEO Brian Robbins; CBS CEO George Cheeks; and Showtime/MTV Entertainment Studios head Chris McCarthy.
Bakish's firing comes during a tumultuous period for the company as its traditional film and television studio businesses decline amid headwinds for the media industry. Bakish was also at odds with majority shareholder Shari Redstone, who is seeking an exit.
Redstone, who has presided over the steep decline of his family's media heirloom, is in a bind. He doesn't want the company founded by his father, the late, ferocious tycoon Sumner Redstone, to be broken up and sold like pieces at auction. Paramount includes the CBS television network, MTV, Nickelodeon, BET and the Paramount Pictures film studio on Melrose Avenue.
But Paramount common shareholders are wary of the two-phase deal with Skydance because Redstone will get a premium for his family's shares.
Paramount is in the midst of a 30-day exclusive negotiation period with Ellison, a tech scion whose Skydance Media has partnered with investment firms RedBird Capital and KKR to acquire Redstone's National Amusements holding company. On Sunday, Skydance improved its offer by $1 billion, with money reserved for Paramount's class B, or non-voting, shareholders, according to three people familiar with the deal but not authorized to comment. National Amusements owns 77% of Paramount's voting shares.
The exclusive trading period ends on Friday. It is unclear whether Skydance and RedBird have given Paramount's board a deadline to accept their revised offer. Skydance and its partners have been discussing with Paramount's independent board members about how much money will go to common shareholders, two people familiar with the matter said. Skydance and its partners have pushed for more profits to pay off Paramount's debt.
The company's credit was downgraded to “junk” status by rating agency S&P Global last month.
Bakish opposed the Skydance transaction, a stance that infuriated Redstone, who in 2016 tapped Bakish to run the company, then known as Viacom. In recent weeks, senior company executives also raised questions about Bakish's leadership and the strength of its long-term plan in their conversations with board members, a development that hastened Bakish's departure from the company. sources said.
Bakish was more open to another deal proposal, favored by smaller shareholders, with private equity firm Apollo Global Management, which has offered $26 billion, including the assumption of Paramount's debt. Sony Pictures Entertainment has been negotiating with Apollo to join that effort. Most insiders expect Apollo and Sony to break up the company, a scenario that Redstone does not want to allow.
Redstone, according to a person familiar with the matter, has also been frustrated with some of Bakish's decisions, including not selling Showtime, the premium cable network the company folded into its television networks and streaming efforts. Bakish had rejected a recent $3 billion bid for the network from investors, including former Showtime chief David Nevins.
Meanwhile, Paramount has lost more than $2 billion on its streaming service, Paramount+.
“Paramount Global includes exceptional assets and we strongly believe in the Company's future value creation potential,” Redstone said in a statement. “I have enormous confidence in George, Chris and Brian. They have the ability to develop and execute a new strategic plan and work together as true partners. “I am very excited about what their combined leadership means for Paramount Global and the opportunities ahead.”
Additionally, the company faces a crucial deadline Wednesday to reach a new deal with cable distribution giant Charter Communications, which operates the Spectrum TV service.
Paramount entered the Charter negotiations with a weak hand: its cable television channels have suffered a drop in ratings amid consumers' shift to streaming. Paramount relies heavily on the revenue it receives from Charter, Comcast, DirecTV and other distributors.
“Paramount still has a popular network, an esteemed studio and strong streaming services, but its business prospects appear weak as it looks to sell,” EMarketer senior analyst Ross Benes wrote in an emailed statement on Monday. “Organizing a new quixotic leadership structure may appease those seeking new blood. But the dramatic removal evokes the feeling of rearranging the deck chairs on the Titanic.”
Less than two minutes after Paramount announced Bakish's departure, the company reported its earnings results.
At the beginning of a call with analysts, company executives said they would not take questions after reporting their financial results. The call lasted just under 10 minutes.
After Cheeks thanked Bakish for “his many years of leadership and steadfast support of all Paramount Global companies, brands and people,” McCarthy sought to calm concerns about the triumvirate's new leadership structure, saying that he, Cheeks and Robbins have worked together for years.
“It's a real partnership,” McCarthy said. “We deeply respect each other, and we will lead and manage this company together.”
He said the company's long-term strategic plan would focus on three pillars: making the most of the company's popular content, strengthening its balance sheet and optimizing its streaming strategy.
Paramount reported $7.68 billion in revenue for the three-month period ending March 31, up nearly 6% compared to the same period a year earlier. Paramount reported a net loss of $554 million, but that was less than its more than $1 billion loss the year before.
The company's streaming division reported revenue growth of nearly $1.88 billion, up 24% from the previous year. The segment's quarterly loss was $287 million.
The company's television media revenues were helped by CBS' February broadcast of the Super Bowl, which attracted a massive audience. Revenue from the television networks division amounted to $5.23 billion, up 1% from the previous year. Revenue for Paramount's film division amounted to $605 million, up almost 3% from the previous year.
The media empire now known as Paramount Global was formed in 2019 from the merger of Viacom Inc. and CBS Corp. But the combination never convinced Wall Street of its promise. In the last year alone, Paramount Global shares have lost almost half their value.
“While the powerful Viacom empire declined tremendously under Bakish, who personally profited greatly, it is not clear that another appointed leader would have turned around Paramount's fortunes,” EMarketer's Benes wrote in a note to investors. “With a mountain of debt and its main assets, namely television, continually losing value, the deep problems facing the company extend beyond any one executive.”
Bakish, who joined Viacom in 1997, was named Viacom CEO in 2016, after the company's stock fell 45% in two years due to declining ratings at some of its key networks, including Comedy Central and MTV, as well as the struggles at his Paramount Pictures film studio.
After Redstone orchestrated Viacom's merger with CBS, Bakish became CEO of the combined company.
“The Board and I thank Bob for his many contributions throughout his long career, including the formation of the combined company, as well as his successful efforts to rebuild the great culture for which Paramount has long been known,” Redstone said in his statement.
Paramount's class B shares rose 3% to $12.25 per share on Monday before Bakish's departure was officially announced. Shares continued to gain slightly in after-hours trading.
