Paramount Global's months-long internal battle came into full focus Monday as CEO Bob Bakish was ousted and pressure mounted on the company's directors to accept — or reject — a takeover offer from David Ellison's Skydance Media.
Shortly before the company announced its first-quarter results, Paramount issued a statement announcing Bakish's departure. The company said three of its top entertainment executives would lead the company: Brian Robbins, CEO of Paramount Pictures; CBS CEO George Cheeks; and Showtime/MTV Entertainment Studios chief Chris McCarthy.
Bakish's resignation comes during a tumultuous period for the company, with its traditional TV and film studio businesses in decline due to headwinds for the media industry. Bakish has also been at odds with controlling shareholder Shari Redstone, who is looking for an exit.
Redstone, who has presided over the precipitous decline of her family's media heirloom, is in trouble. She doesn't want the company built by her father, the late, fierce mogul Sumner Redstone, to be chopped up and sold at auction for parts. Paramount includes the CBS television network, MTV, Nickelodeon, BET and the film studio Paramount Pictures on Melrose Avenue.
But Paramount's common shareholders are wary of the two-phase deal with Skydance because Redstone will receive a premium for her family's shares.
Paramount is in the midst of a 30-day exclusive negotiating period with Ellison, a tech scion whose Skydance Media has teamed with investment firms RedBird Capital and KKR to acquire Redstone's National Amusements holding company. On Sunday, Skydance tightened its offer by $1 billion, with money earmarked for Paramount's B-class, or non-voting, shareholders, according to three people familiar with the deal but not authorized to comment. National Amusements owns 77% of Paramount's voting stock.
The exclusive negotiation period ends Friday. It is unclear whether Skydance and RedBird have given Paramount's board a deadline to accept the revised offer. Skydance and its partners have been feuding with Paramount's independent board members how much money goes there common shareholders, two knowledgeable people said. Skydance and its partners have pushed for a larger share of the proceeds to pay down Paramount's debt.
The company's credit rating was downgraded to 'junk' status by rating agency S&P Global last month.
Bakish opposed the Skydance transaction, a position that infuriated Redstone, who in 2016 chose Bakish to lead the company, then known as Viacom. In recent weeks, senior company leaders in their conversations with board members have also raised questions about Bakish's leadership and the strength of his long-term plan — a development that hastened Bakish's departure from the company, the sources said.
Bakish was more open to another proposed deal, favored by smaller shareholders, with private equity firm Apollo Global Management, which has offered $26 billion, including the assumption of Paramount's debt. Sony Pictures Entertainment has negotiated with Apollo to join that initiative. Most insiders expect Apollo and Sony to break up the company, a scenario Redstone is unwilling to allow.
Redstone is also frustrated by some of Bakish's decisions, including not selling Showtime, the premium cable network the company has integrated into its television networks, and streaming efforts, according to a person familiar with the matter. Bakish had rejected a recent $3 billion offer for the channel from investors including former Showtime head David Nevins.
Paramount has now lost more than $2 billion on its streaming service Paramount+.
“Paramount Global has exceptional assets and we strongly believe in the company's future value creation potential,” Redstone said in a statement. “I have enormous confidence in George, Chris and Brian. They have both the ability to develop and implement a new strategic plan and to work together as true partners. I am extremely excited about what their combined leadership means for Paramount Global and the opportunities that lie ahead.”
In addition, the company faces a crucial deadline on Wednesday to strike a new deal with cable distribution giant Charter Communications, which operates the Spectrum TV service.
Paramount entered Charter negotiations on a weak hand: its cable TV channels have suffered from declining ratings due to consumers' shift to streaming. Paramount relies heavily on the revenue it receives from Charter, Comcast, DirecTV and other distributors.
“Paramount still has a popular network, an esteemed studio and solid streaming services, but its business prospects appear weak when it looks to sell,” EMarketer senior analyst Ross Benes wrote in an emailed statement Monday. “Establishing a new quixotic leadership structure may appease those looking for new blood. But the dramatic removal evokes the feeling of rearranging the deck chairs on the Titanic.”
Less than two minutes after Paramount announced Bakish's departure, the company announced its earnings results.
At the start of a call with analysts, company executives said they would not answer questions after reporting their financial results. The conversation lasted just under 10 minutes.
After Cheeks thanked Bakish for “his many years of leadership and steadfast support for all of Paramount Global's businesses, brands and people,” McCarthy attempted to allay concerns about the triumvirate's new leadership structure by saying that he, Cheeks and Robbins have already years of working together.
“It's a true partnership,” McCarthy said. “We have a deep respect for each other, we will lead and manage this company together.”
He said the company's long-term strategic plan would center around three pillars: maximizing the company's popular content, strengthening its balance sheet and optimizing its streaming strategy.
Paramount reported revenue of $7.68 billion for the three-month period ending March 31, up nearly 6% from the same period a year earlier. Paramount reported a net loss of $554 million, but that was down from the more than $1 billion loss a year earlier.
The company's streaming division saw a revenue increase of nearly $1.88 billion, up 24% from a year earlier. The segment's quarterly loss was $287 million.
The company's TV media revenues were boosted by CBS's broadcast of the Super Bowl in February, which drew a huge audience. Revenue for the television networks division totaled $5.23 billion, up 1% from a year earlier. Paramount's film division revenues totaled $605 million, up nearly 3% from a year earlier.
The media empire now known as Paramount Global was formed in 2019 from the merger of Viacom Inc. and CBS Corp. But the combination never convinced Wall Street of its promise. In the past year alone, Paramount Global shares have lost almost half their value.
“Although the mighty Viacom empire declined enormously under Bakish, who personally profited handsomely, it is not clear that another appointed leader would have changed Paramount's fortunes,” EMarketer's Benes wrote in a letter to investors. “With a mountain of debt and its most important asset, television, continually losing value, the deep problems facing the company extend beyond any single director.”
Bakish, who joined Viacom in 1997, was named CEO of Viacom in 2016 after the company's shares fell 45% in two years due to declining ratings at some of the major networks, including Comedy Central and MTV , and problems at his Paramount Pictures film studio.
After Redstone orchestrated Viacom's merger with CBS, Bakish became CEO of the combined company.
“The board and I thank Bob for his many contributions throughout his long career, including in the formation of the combined company and his successful efforts to rebuild the great culture that Paramount has long been known for,” Redstone said in her declaration.
Paramount's B-class shares rose 3% to $12.25 per share on Monday before Bakish's departure was officially announced. Shares continued to rise slightly in after-hours trading.
