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Exclusive: Sony/Apollo $26B bid may imply around $20/sh per PARA common share

Published 05/03/2024, 02:24 PM — Holders of Paramount Global Class B (NASDAQ:PARA) shares have good reason to be excited about last evening's official Sony (NYSE:SONY)/Apollo (NYSE:APO) $26 billion bid for the company.

Data from Matrix Asset Advisors - one of PARA's shareholders - accessed exclusively by shows that the smaller premium paid for Shari Redstone's National Amusements Inc. (NAI) by Sony/Apollo would imply a price of around $20/share for PARA's common stock—a nearly 40% premium over the current share price as of this writing.

According to Matrix, the original Skydance bid offered 'an unrealistic premium' for Shari Redstone's NAI, owner of roughly 77% of Paramount's voting stock (NASDAQ:PARAA) and only 10% of its common stock. 

With NAI valued at the $2 billion by Skydance, Paramount's voting stock would be worth anywhere around $35-40/share, a roughly 300-400% implied premium. This would position Paramount's regular stock at anywhere between $10.50-11.75 a share, roughly where the market had priced in PARA common stock in light of the Skydance deal. 

"In the Skydance deal, non-voting shares get nothing beyond their diluted stake in Paramount + the Skydance asset bought at an excessively generous value," said David Katz, CIO of Matrix Asset Advisors. "So Redstone obviously prefers this huge payout for her, has no regard for the remaining shareholders, and is likely far less concerned about the future of the company than her personal desire to get as much money as possible for the PARAA stake," he concluded.

However, with Sony/Apollo pricing in the premium over PARAA shares at usual market deal terms, i.e., around the 20-25% range, the $26 billion offer would imply a much larger premium for common shareholders, positioning PARA stock at just below $20/share. 

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Paramount currently has $12.6 billion in net debt, which would leave around $13.4 billion out of the $26B proposed by Sony/Apollo for the company's shareholders. 

Paramount has 666.48 million shares outstanding, 625.5M common, and 40.7M preferred shares. Assuming the deal closes with today's market pricing, this would imply that PARA shares would be priced anywhere between $19.41 and $20, hinging on the premium paid for PARAA shares. 

These numbers imply a roughly 40% premium over the company's price as of this writing and a nearly 90% premium over the original Skydance offer. 

However, Matrix's David believes "If the Board can show justification for additional value, the bid could be lifted by $1-2 billion or even more, which would be very significant for the 90% of the Paramount shareholders who are not Shari Redstone." 

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