Despite the potential sale of Paramount Global, majority shareholder Shari Redstone kicked off the company's annual investor meeting Tuesday by expressing confidence in its new management structure and hinting at more cost cuts to come.
Paramount executives declined to answer questions about its sale talks with David Ellison's Skydance Media, which have accelerated in recent days.
Paramount's special board committee backed a deal that would give investors the option to cash out or keep their shares in a bet on Ellison's ability to rebuild the storied media giant, according to people close to the negotiations.
The deal with Skydance still requires approval from Redstone, who is weighing the possibility of selling his family's stake in Paramount.
But with any sale still months away from completion, Paramount's newly installed “office of the CEO,” comprised of division chiefs George Cheeks, Brian Robbins and Chris McCarthy, outlined a “forward-looking” strategy for running Paramount as one entity. independent and improve its battered balance sheet. The trio took over at Paramount in late April following the ouster of Bob Bakish, who had led the company since its merger with CBS in late 2019.
The trio unveiled a plan that focuses on $500 million in cost cuts, including an undisclosed number of layoffs, the sale of assets and exploring a joint venture for the company's Paramount+ streaming service.
“We all agree that Paramount is not where we want it to be,” McCarthy said in prepared remarks.
“Given the strength of our assets, our people and our long-term competitive advantage in achieving some of the largest and most extensive successes, we know there is significant value to unlock,” McCarthy said.
Shares fell about 3% to $12.34 in midday trading Tuesday. Shares received a boost Monday following news that a deal was within reach with Ellison's Skydance, which is joined by RedBird Capital Partners and private equity firm KKR.
Paramount has stumbled in recent years.
The Redstone family-controlled company, once an entertainment industry colossus, has fallen behind traditional rivals including Walt Disney Co. and Comcast, as well as tech startups such as Amazon and Netflix.
Years of underinvestment, mismanagement, titanic shifts in audience behavior, the COVID-19 pandemic and a costly push into streaming have diminished its position. Its once-vibrant cable channels, including Comedy Central, MTV and Nickelodeon, have lost reputation and ratings. To exacerbate his debt problems, Bakish passed up opportunities to sell assets, including Showtime and BET.
Last year's strikes by the Writers Guild of America and SAG-AFTRA slowed the flow of content.
S&P Global downgraded Paramount's credit rating to “junk” status earlier this year. Investor Warren Buffett ran out and sold shares at a loss. Last month, he acknowledged that buying 63 million Paramount shares was a mistake.
During Paramount's 44-minute shareholder meeting, several investor proposals were rejected, including measures to clarify the use of artificial intelligence and restrictions on gold shields for key executives.
Six board members were re-elected to oversee the company.
In addition to Redstone, board members Linda M. Griego, Barbara M. Byrne, Judith A. McHale, Charles E. Phillips Jr. and Susan Schuman returned for one-year terms on the board. Four other board members resigned.
The belt-tightening comes after several previous waves of cost-cutting and asset sales, such as the disposal of book publishing giant Simon & Schuster and the CBS real estate business, including its Manhattan skyscraper and its film and television lot in Studio City.
“Our plan starts with transforming streaming, which will accelerate our path to profitability and offset declines in our linear business,” Cheeks said during his prepared remarks.
“We will reduce non-content costs by streamlining our organization, allowing us to build a more efficient and agile company that is better positioned to win,” Cheeks said, adding that the team has already “identified cost reduction opportunities in the near term, with an annualized impact of $500 million” in its effort to return Paramount to investment grade status.
Despite the turmoil and gravity of his upcoming decision about the company's fate, Redstone showed signs of determination in his brief remarks. He expressed his support for the three executives who now run the company.
McCarthy is the longtime leader of MTV Entertainment Studios and, more recently, Showtime; Cheeks has been CEO of CBS for four years; and Robbins has led Nickelodeon and Melrose Avenue Paramount Pictures since 2021.
“While we recognize that this is not a traditional management structure, we are confident that it will allow them to act quickly to implement best practices across the company and drive better performance,” Redstone said.
The three men “have been behind our biggest hits for years,” he said.
David Ellison, founder of Skydance Media, hopes to buy Paramount.
(Evan Agostini / Invisión / AP)
On the deal front, Ellison's improved proposal is the latest and third offer from Skydance and its backers.
The deal would include $4.5 billion to buy out non-voting Class B shareholders at $15 per share during a second phase of the transaction. There would also be a $1.5 billion cash injection to shore up Paramount's balance sheet and help reduce debt, according to people familiar.
Redstone was presented with details of the plan this week.
While he has long favored Ellison's deal over a possible sale to Sony Pictures Entertainment and Apollo Global Management, he needed to stay on the sidelines while Paramount's independent directors, led by Phillips, negotiated a deal that would also protect the interests of the people. common and ordinary. -shareholders with voting rights.
Skydance's proposal would give the Redstone family more than $2 billion for its holding company National Amusements Inc. and its voting shares in Paramount. The infusion would allow the family to pay off National Amusements' debts and obtain about $1.8 billion, according to a person familiar with the matter who was not authorized to comment.
