On May 4, Paramount Universal's board of directors formally approved negotiations for a potential acquisition with Sony Pictures and Apollo Global Management. This Hollywood giant, which has produced countless classic movies such as "The Godfather", "Titanic", "Forrest Gump" and "Transformers", will change hands again.
It is reported that Sony Pictures and Apollo have issued a non-binding $26 billion (about 180 billion yuan) non-binding all-cash takeover offer letter to Paramount on May 1, which includes taking on Paramount's debts. This could be the world's largest cash acquisition this year. According to the latest news, Paramount's special committee has launched trade talks with Sony and Apollo.
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The thirties and forties of the twentieth century were the golden age of Hollywood, when production companies had developed into an oligopoly in which a few companies jointly controlled part of the market. Eight major corporations dominate the entire film industry: Paramount, Lowe's (often known for its production subsidiary, MGM), Fox (renamed Twentieth Century Fox in 1935), Warner Bros., and Raiden Bloom; and Universal, Columbia, and United Arts in the "Three Smalls".
After years of development and mergers and acquisitions, by the beginning of this century, the pattern was basically stable into six majors, namely Warner Bros., Paramount, 20th Century Fox, Sony, Disney and Universal. At the beginning of 2019, Disney, which has always pursued acquisitionism, ate 20th Century Fox at a sky-high price of 54.2 billion, and Hollywood officially became the Big Five.
In the years of turbulent Hollywood mergers and acquisitions, Paramount finally marked the end of an era, no matter who the flowers were.
A sky-high acquisition of 180 billion
The offer comes as Paramount approaches the deadline for exclusive negotiations with Hollywood studio Skydance. Previously, Paramount had been in talks with Skydance for a month, but no agreement was reached. Analysts believe that this potential acquisition will help Sony Pictures expand its share of the North American box office.
Sony Pictures is part of the Tokyo-based Sony Group, which encompasses film and television production, acquisition and distribution, digital content creation and distribution, studio facility operations, and the development of new entertainment products, services and technologies. Sony Pictures has over 3,500 movies and some famous series such as Jumanji, Resident Evil series, and more.
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Many shareholders see $26 billion as a good offer. The current market capitalization of Paramount stock is about $9 billion, and this offer could buy about three Paramounts, while the media company is saddled with more than $14 billion in debt.
But Paramount's current helmsman, Sally Leishidong, is reportedly more bullish on the offer with Skydance, even though the deal won't bring much benefit to ordinary shareholders in the short term. Because the structure of the deal could dilute the equity of existing investors while forcing them to fund Skydance's investment. At the moment, Paramount is still divided internally.
Whichever company is more likely to complete the acquisition will undoubtedly help its business in the field of film production and distribution. After all, Paramount, as a veteran film company, has a mature film production system, and Paramount + streaming media also has tens of millions of users.
Through prosperity and change
Paramount dates back to 1912, a month before Universal Pictures, and is the oldest of the eight Hollywood companies. From the very beginning, Paramount owned a large number of movie theaters and also operated a production business. Paramount's two founders, Adolf Zucker and Jesse Laski, founded the Actors Company in 1912 and the Jesse Lasky Feature Films Company in 1913. In 1916, the two production companies merged, and in 1935 they were reorganized to form Paramount Pictures. After that, it expanded rapidly to the early thirties of the last century, and has become Hollywood's leading film company.
In the 50s and 60s, Paramount, like other large companies, was hit by the depression of the American film industry, with film production declining and revenues decreasing. In 1966, the oil capital group bought Paramount, and produced a series of high-grossing films such as "The Godfather" and "Weekend Carnival", which reached record numbers in 1978.
From the 60s to the 90s, Paramount Pictures changed its real power quickly, but this did not affect the quality of the company's films, and Paramount successively produced a number of classic films such as "Love Story" and "Raiders of the Lost Ark".
In 1993, entertainment giant Viacom and former Paramount CEO Barry Diller competed fiercely for Paramount, and Viacom won the battle with a $10 billion bid, proving Paramount's immense value.
From 1994 to 2004, Paramount entered another prosperous period, producing "Braveheart", "Forrest Gump", "Titanic" (co-funded with Twentieth Century Fox), "Mission Impossible", "Changing Face", "Truman's World" and "Saving Private Ryan".
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In 2005, Paramount merged with DreamWorks to solve the company's already sluggish situation in film development, and in 2007, released "Shrek 3" and "Transformers," which were super-grossing films that made Paramount the highest-grossing major company in Hollywood.
In 2019, the company merged with another media giant, CBS, and changed its name to Paramount Global. But since then, Paramount's stock price has fallen year after year, and Paramount's most popular movie in 2023 is "Mission Impossible 7", which has a global box office of only $560 million, and is not even profitable, but this movie has accounted for a quarter of the company's theater business of $2.09 billion at the box office.
Image source: NetEase
According to the financial report, Paramount's revenue in 2023 will be US$29.652 billion, a slight decrease from US$30.154 billion in the previous year, and the net loss attributable to the company for the whole year will be US$608 million, which will turn into a loss from a net profit of US$1.104 billion in the previous year. In terms of stock price, Paramount Global is down more than 40% in 2023.
Sweet and sweet in the eyes of the acquirer
In fact, there are more companies interested in Paramount than that. In December 2023, another investment group, RedBird Capital and Skydance Media, were simultaneously revealed to be considering buying control of Paramount.
Allegedly, the parties were considering a deal involving exhibitor National Amusements, which owns 77% of Paramount Class A shares; Skydance and RedBird are not interested in Paramount Cable Network or KCBS-TV, but rather value IP and Paramount Pictures control.
A week later, on December 19, Warner Bros. Discovery CEO David Zaslav also met with Paramount CEO Bob Bakish in New York and spoke with Paramount Chairman Shari Redstone to explore a possible merger in advance.
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On January 31 of this year, Byron Allen, the media tycoon who owns Allen Media Group, proposed to buy all of Paramount's outstanding shares for a total value of $14.3 billion.
It is reported that at that time, Allen offered $28.58 per share to acquire Paramount's voting shares, a 50% premium to the latter's recent stock trading price, and the purchase price of non-voting shares was $21.53 per share. The total value of the deal, including debt assumed, is approximately $30 billion.
Also in January of this year, Skydance Media, which threw out an olive branch late last year, and its financial backers began to explore the possibility of privatizing Paramount Global-B. On April 8, Skydance Media entered into exclusive negotiations with Paramount Universal's parent company, National Amusements. However, the exclusive negotiation window between the two sides expired on May 3 and no agreement has yet been reached.
Growth is sluggish, strong hands are waiting, and Paramount's century-old foundation is still undecided. But under the turbulent tide of the times, it may also be a good choice to sell the company and hand it over to a more suitable person to manage.
Source: Wall Street News, New Fortune Magazine, Tiger Sniff APP, Business Guest, Baidu Encyclopedia
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