Paramount Stock Set to Rise Following FCC Merger Approval: What Investors Need to Know
Shares of Paramount are poised for a positive opening on Friday after receiving long-awaited approval from the Federal Communications Commission (FCC) for its merger with Skydance Media. This pivotal approval removes a significant uncertainty surrounding the company’s future, although questions remain about its strategic direction under the new leadership. Ahead of the market opening, Paramount’s stock has increased by approximately 1%, reaching $13.40.
The merger involves David Ellison’s Skydance Media agreeing to pay $4.5 billion to acquire a substantial portion of the Class B shares at a price of $15 each. The FCC’s endorsement, which allows for the transfer of 28 licenses from Paramount-owned CBS stations to the Skydance-led ownership group, marks the final step before the deal’s official closure, anticipated within the next few weeks.
MoffettNathanson analyst Robert Fishman emphasizes that the conclusion of this extensive sale process will empower Skydance leadership to take charge. "With new management in place, the real work begins—rebuilding Paramount, addressing critical strategic questions, and paving the way for a sustainable and competitive future," he notes.
As the earnings season unfolds, it remains uncertain whether the merger will officially close before Paramount releases its second-quarter report, expected in early August. However, clarity on the new ownership’s plans is anticipated by the third-quarter reporting date in November, as analysts are currently unable to develop a solid model for the company’s future.
The incoming management team is taking shape with David Ellison as CEO and Jeff Shell as President. The company is also in the process of finding a replacement for its recently departed Chief Financial Officer, Naveen Chopra, with Andrew Warren currently serving as interim CFO. Among the existing leadership, CBS chief George Cheeks is expected to stay, while Chris McCarthy and Brian Robbins will be leaving.
A key concern for investors is the future of Paramount’s linear networks. Competitors like Comcast and Warner Bros. Discovery are spinning off similar assets, but TD Cowen’s Doug Creuz suggests that the Ellison family likely did not acquire Paramount to dismantle it for parts. The media industry, including Paramount, is facing challenges with declining linear assets, leading to speculation about whether Skydance will remain in the cable network business or consider a spin-off or combination with other portfolios.
Another pressing issue is the renewal of sports rights, particularly concerning the NFL. The current contract with the NFL includes a change-of-control clause that will trigger early renegotiation once the Skydance deal closes. Fishman believes that the league is unlikely to miss an opportunity to negotiate for better terms, which could result in either higher annual payments or alternative value transfers.
Investors are keenly awaiting insights into the combined company’s streaming strategy for Paramount+, including potential partnerships, bundling options, and content licensing. Questions are being raised about the role of Pluto TV—will it serve as a gateway to Paramount+, or is a sale on the horizon? Additionally, there is speculation about whether Skydance will significantly increase content investment, something that the financially constrained Shari Redstone-owned company has struggled with.
The FCC’s approval follows a review lasting over 250 days, amid considerable controversy, including a settlement involving former President Donald Trump and a lawsuit against Paramount’s CBS News and 60 Minutes. The merger will allow the Ellison family and Gerry Cardinale’s RedBird Capital to acquire Redstone’s National Amusements, which holds a controlling interest in Paramount, for $2.4 billion. Skydance’s $4.5 billion cash offer for Class A and Class B shares, priced at $23 and $15, respectively, will facilitate this acquisition. Ultimately, the Skydance investor group will hold 100% of New Paramount’s Class A shares and 69% of outstanding Class B shares, representing about 70% of the pro forma shares outstanding.
As developments unfold, investors and analysts alike are eager for clarity on the future direction of Paramount under Skydance’s leadership. Stay tuned for further updates as this story progresses.
