Paramount drama swirls as CEO exits amid merger talks

What’s a major entertainment company and film studio without a little drama? Paramount Global (NASDAQ:PARA) has certainly had its share in recent months, and that drama continued on Monday.

On Monday afternoon, Paramount announced that CEO Bob Bakish was leaving, to be replaced by an Office of the CEO with three co-CEOs. The news comes amid a flagging stock price and persistent merger-and-acquisitions talks over the past six months or so.

Merger drama heats up at Paramount

Bakish had been with Viacom since 1997 and became CEO in 2016. In 2019, he took on the CEO role at the combined company formed from the merger of CBS and Viacom. In 2022, that company rebranded itself as Paramount Global.

Paramount has struggled in recent years, as the COVID-19 pandemic hurt its film business while its streaming and TV businesses have faced challenges with generating profits in this new era of streaming.

The company has been in merger talks for months, looking for a partner to bolster its fortunes. Since early April, Paramount has been in exclusive merger talks with Skydance Media. The company’s board chose to negotiate with Skydance, a movie studio run by David Ellison, over private-equity firm Apollo Global Management, which had made a $27 billion all-cash offer.

This decision was reportedly a source of conflict between Bakish and Shari Redstone, board chair at Paramount Global and president of National Amusements, the holding company that controls about 80% of the voting shares in Paramount Global. The writing had been on the wall that this dispute could lead to Bakishʻs departure, and on Monday, it was announced that he was stepping down.

“The board and I thank Bob for his many contributions over his long career, including in the formation of the combined company as well as his successful efforts to rebuild the great culture Paramount has long been known for. We wish him all the best,” Redstone said in a statement.

Office of the CEO

Bakish will be replaced by a new Office of the CEO consisting of three executives: George Cheeks, president and CEO of CBS; Chris McCarthy, president and CEO of Showtime/MTV Entertainment Studios and Paramount Media Networks; and Brian Robbins, president and CEO of Paramount Pictures and Nickelodeon.  

The Office of the CEO is charged with developing a long-range plan to accelerate growth, develop popular content, streamline operations, strengthen the balance sheet, and optimize the streaming strategy.  

“I have tremendous confidence in George, Chris and Brian,” Redstone said. “They have both the ability to develop and execute on a new strategic plan and to work together as true partners. I am extremely excited for what their combined leadership means for Paramount Global and for the opportunities that lie ahead. Paramount Global includes exceptional assets, and we believe strongly in the future value creation potential of the company.”

Season finale?

Paramount also posted its first-quarter earnings results on Monday, beating revenue and earnings projections, although its stock price fell about 4%. It was actually a solid report as its revenue rose 6% year over year while its operating loss narrowed by 66% to $417 million. Paramount Global also grew its direct-to-consumer revenue by 24%, including a 51% revenue increase for its Paramount+ streaming service, which added 3.7 million subscribers in the quarter.

However, those solid earnings results were overshadowed by all the CEO and merger drama. The exclusive 30-day negotiation period with Skydance is slated to expire this week, so there could be news forthcoming — or not.

Skydance did sweeten the deal on Sunday, according to various news sources, reportedly offering a $3 billion cash infusion to pay down debt and repurchase shares. Skydance is also reportedly looking to give Paramount shareholders a bigger stake in the combined company than previously thought, alleviating a concern that many shareholders previously had that this was a better deal for Redstone than it was for them.

This is said to be Skydanceʻs best and final offer, according to news reports. With the 30-day negotiating period with Skydance scheduled to end on May 3, we should know something one way or the other by then.

Analysts had thought they might get some insight on the conference call that followed the earnings release on Monday, but there was another plot twist. One of the new CEOs, McCarthy, went over the results for the quarter and then abruptly ended the call after just nine minutes without the usual question-and-answer period with analysts.

Instead, the company played the Mission: Impossible theme song on a loop for analysts, according to multiple reports. Of course, Mission: Impossible is one of Paramountʻs biggest film franchises.

Stay tuned as the drama unfolds this week.