Paramount Is Going To Break Up In Two Years Says Top Analyst
A Wells Fargo analyst says Paramount Global needs to make significant changes to avoid breaking apart within two years.
Paramount Global is a massive multimedia company with one of Hollywood’s oldest studios, Paramount Pictures, as one of its assets. Despite this longevity and history, a top analyst is predicting that the company has a year or two at most before breaking up. IndieWire reported on equity analyst Steven Cahall of bank Wells Fargo’s thoughts on the company’s prospects, and things don’t look good.
Cahall sent a note to his clients that indicated he thinks that Paramount Global’s studios are worth about $30 billion if the company decided to sell, and said the company is worth about $22.3 billion now as it stands. This means that the studios contained within the company’s structure are valued more than the parent company itself, which isn’t a good sign.
In order to avoid breaking up and becoming worth less in Cahall’s one to two-year timeline, the alternative seems to be the company getting ahead of the problem and selling assets now to get the most out of them.
While the company would have to sell many of its assets for not-great prices, Cahall says there would be “significant interest” in Paramount Studios and CBS Studios. Reportedly, streamers like Netflix have expressed previous interest in nabbing these assets.
This is why, if Paramount Global is indeed in trouble, as Cahall indicates, it would be best for the company to parse out its assets rather than try to sell the company as a whole.
Netflix wouldn’t care about acquiring everything the company has under its umbrella, but it would certainly be interested in obtaining Paramount Studios and all of its assets. The other assets, like cable channels, would likely be of little interest to future-focused companies like Netflix.
To get itself back on track financially, Paramount Global has been in the process of trying to offload its publishing asset, Simon & Schuster, but previous deals have fallen through. The last time it tried to sell Simon & Schuster to Penguin Random House for a whopping $2.2 billion, the deal got blocked for regulatory reasons by the Department of Justice.
However, there is reportedly another Simon & Schuster sale that is being worked on that will be worth over $1 billion, so that could potentially be the lifeline the company needs to continue operating.
Meanwhile, Paramount has some other assets that it is currently working on selling, including its New York City headquarters and the BET Group. Reportedly, it is hoping for around $3 billion or more for the sale of the BET Group, and Tyler Perry, who owns 25 percent of BET, is supposedly leading the charge for auctioning it off. Meanwhile, the company is also looking for a new owner for its kids’ brand Noggin.
As Cahall’s report says, these moves by Paramount are simply “to stay the value-destructive course.” Cahall also has said that the company should shut down its Paramount+ streaming business, so he clearly doesn’t think that things are going in the right direction for the company in any arena.
For now, we’ll just have to wait and see if Cahall’s analysis turns out to be right and if the company can stay afloat as is.
