Paramount, even with a takeover offer, may still prove a rare losing bet for Berkshire Hathaway

Published Mon, Feb 5 202411:05 AM ESTUpdated Mon, Feb 5 202411:28 AM EST

Paramount Global shares got a boost last week after reports of a potential takeover offer , but the media company could still prove a rare losing bet for Berkshire Hathaway , its biggest institutional investor. The media company's Class B shares climbed almost 5% last week to close Friday at $14.43 as investors cheered billionaire media mogul Byron Allen's $14.3 billion buyout bid. Allen Media Group offered $21.53 for each Class B nonvoting share of Paramount, about 50% above the 90-day average price. But even that is still far below the price Berkshire paid to acquire its nonvoting stake in the first quarter of 2022, when the Class B stock traded as high as $38.50 and as low as $27.90. The Omaha-based conglomerate owns 93.7 million shares of Paramount nonvoting Class B stock, or a 15.4% stake, according to FactSet. PARA 5Y mountain Paramount As recently as last spring, Buffett expressed pessimism about the streaming industry, leading many to speculate that it was one of his investment managers who bought Paramount. It may have been the case that Berkshire was betting on Paramount being an acquisition target. The "Oracle of Omaha" thinks the industry has too many players seeking viewer dollars, causing a stiff price war. Meanwhile, there is a finite number of subscribers that all streamers compete for, while the shows and movies remain expensive to acquire or produce. "You need higher prices, or it doesn't work," Buffett said at Berkshire's 2023 annual meeting. "You've got a bunch of companies that don't want to quit. And who knows what pricing does under that. But anybody who tells you that they know what pricing will do in the future is kidding themselves." Paramount has struggled in recent years, suffering from declining revenue as more consumers abandon traditional pay-TV, continued streaming losses and rising interest rates. The stock had registered seven straight losing years, and it's in the red again in 2024. Shari Redstone, who controls Paramount through her company National Amusements, has been open to deal-making in recent months in an effort to either merge or sell the company that's home to brands such as CBS, Showtime, Nickelodeon and its namesake movie studio. There have been reports of discussions for a sale to Skydance Media as well as Warner Bros. Discovery . Many are skeptical that Allen's deal will come to fruition. "After so many second-place finishes, we would have thought the market would have brushed aside this news as a non-event, even if it does theoretically value PARA as a twenty-something," Don Bilson, head of event-driven research at Gordon Haskett, said in a note. Allen has a long history of making offers on major media assets, but few of his bids have resulted in sales.