Paramount Global (NASDAQ: PARA) has seen a rating upgrade amidst speculation of a bidding war.
Paramount Global (PARA) stock has received an upgrade from Wolfe Research. The firm has elevated its rating to Peer Perform from Underperform, citing the company’s robust asset strength and discretionary cash flow potential. Recent press reports have underscored these strengths, hinting at a possible bidding war between Skydance and Apollo.
The speculation surrounding Paramount’s future gained momentum following significant events last spring, including a dividend cut and a notable investment by BDT & MSD into National Amusements, the majority holder of Paramount’s Class A shares.
A recent report from the Wall Street Journal suggests that the flexibility in negotiations by Apollo has increased the chances of a sale of Paramount to Skydance.
Skydance has reportedly entered an exclusive 30-day negotiation period for a merger with Paramount, with terms agreed upon by Shari Redstone. Analysts view this development as indicative of a higher chance for potential secondary transactions, such as merging Skydance into Paramount and gaining approval from Paramount’s independent committee of directors.
The upgrade comes without a specific price target and follows the firm’s methodology. The firm acknowledges the diminished opportunity to leverage Paramount’s downside for further value, given the increasing likelihood of a change in ownership.
Analysts Favor Merger with Skydance
Analysts assess the potential merger with Skydance as advantageous for all shareholders, with exclusive merger discussions suggesting a strategy that could integrate Skydance into Paramount beneficially. Following a substantial share price rise on Wednesday, analysts estimate the implied enterprise value to EBITDA multiple for the film segment of Paramount to be at least 15.4 times. Considering the conservative estimates for CBS and cable networks, the multiple is deemed justifiable in light of the robust cash flows generated by the company’s film library.
In summary, the upgrade to Peer Perform for Paramount Global indicates a broad consensus that the company’s current stock price reflects its strategic position and the potential for a successful merger with Skydance.
Paramount Global (NASDAQ: PARA) Stock Reaction
PARA stock fell 3.23% to close at $11.97 on Friday. The traders had exchanged hands with 50,677,870 (50.67 million) shares compared to the average daily trading volume of 18.39 million.
