You have been throughout this business
in its many iterations. And I just want to focus first, John, on
yesterday growth being borne out, being shown by the business, particularly in
streaming, thanks in many ways to the Superbowl, but it was overshadowed by
the departure of Bob Bakish. What did you make of the move?
Well, it was pretty shocking to us. You know, I've been Ariel has been in
business for 41 years. We've not seen anything remotely like
this. It's just extraordinary.
And it can't be good for shareholders to be able to have all this uncertainty.
And earnings season, you're in the middle of a merger and acquisition
transaction. You're you're negotiating with charter
communications. All these important things are happening
all at once. And you need the CEO in place.
So this has just been very, very disappointing, disheartening,
and also in the context of what you said.
Business has been getting better. A lot of the initiatives that Bob and
his Bob and his executive team have worked on are really starting to show
fruition. So the timing just seems extremely,
extremely problematic. Let's just talk about probably why Bob
Bakish has exited. And it's because he felt that the
negotiations reportedly underway with Skydance were not within his agreement.
Now, Shari Redstone is a controlling shareholder at the moment with for
national amusements. It seems to be the deal that she's
looking for with Skydance. How are you currently dealing with the
reports of a so-called sweetened deal? What would you make of a combination of
Paramount with Skydance? Well, we don't know enough.
We know we've read all the same, you know, pieces that have been written
about this. And institutions like POC have had
really good information that we've had confirmed.
And so this transaction is really is focused on skydance's.
We think that that may possibly have a chance to work, but we really would much
rather see the Apollo deal with Sony that's been so rumored to be out there
to get certainty of a you know, Apollo is a world class firm with extraordinary
resources. Sony has proven to be so successful, you
know, in this industry that seems like a marriage made in heaven.
And so we wouldn't rush to the altar with a smaller company.
That's not as proven as the Apollo and Sony.
John, good morning. It's Ed in San Francisco.
Do you get any sense because you've held this idea that we should look at other
offers on the table for a while? Do you still hold that belief?
But actually the hope the other offers will be looked at?
Well, that's what we here we have you know, we had a lot of confidence in
management has been nothing but straightforward and candid with us that
they cared about all shareholders. And as you know, the employee base is
all own the secondary shares. So we really have been very, very
hopeful that they were going to do the right thing for shareholders.
And that's been something that's been committed to us consistently
and we believe them. And we just continue to think that you
don't need to rush when things are getting going.
Well, this is not a melting ice cube. This is a company in recovery in a
turnaround mode. And we want to make sure that all
shareholders get to be able to take advantage of that.
And the price that Skydance is suggesting seems to us what we read much
lower than what we would get from the Apollo Sony deal and many others that
could possibly be out there if this company was truly shopped around.
And the final thing I would say is the directors we know several independent
directors, and we know that they're committed to doing what's fair for all
shareholders. So I'm hoping they'll be able to get to
the finish line. John, what does a change of ownership
structure or this M&A power fix for Paramount?
Well, I think that with Apollo and Sony, you would end up with enormous resources
that would help them with their balance sheet that has gotten higher than we
would have hoped. You'll be able if you work with Sony.
Sony has been an expert in being an arms dealer, being able to use content and
ways to generate cash flow and profits and have the extraordinary library that
Paramount brings. The history of Paramount's,
you know, lot where they have been able to make
movies for generations and there'll be enormous synergies.
You know, I think the synergies between Sony and and Paramount plus Paramount
are much, much greater than you can imagine with a smaller company like
Skydance. So we're really hopeful that you'd be
able to get great synergies, higher cash flow and an experienced management team
that will be able to make those tough calls of what happens with Paramount.
Plus, how much do you use content there? How do you use it in selling it to other
competing services like Netflix? We want that kind of experience,
leadership that has been proven. And I know there are some other large
streamers out there that could possibly also get into the mix.
We are, of course, with John Rogers of Ariel Investments, founder, co-CEO to
our radio and TV audience John. Regulatory issues, though, with both
potential tie ups. Is that a concern for you?
I think it's a modest concern for the real large guys that are out there.
I understand that people would be worried if Netflix, for example, was to
buy Paramount Global. But ultimately, I think if people are
really looking at this for the long run, you know, there's been a lot of
litigation around some of the regulatory constraints that are out there in
today's economic system. I think ultimately rational people will
see, do you want to see Paramount Plus collapse?
Do you want to see all those jobs lost? Do you want to see a world class
American company in disarray? Where do you want to see it?
Find a great parent where they can merge and have a successful growing business
over the next like over the next decade or so.
So I think I'm hopeful that regulators will be able to make the right decision,
have an open mind about all the various different possible combinations that are
out there. And I certainly think the Apollo Sony
deal should not have any significant regulatory concerns.
John, you've written to your own investors in your Q1 report really
saying, look, you're not an activist investor, but you feel it's your
fiduciary duty to raise concerns, particularly from a corporate governance
perspective here. And I want to go back to the fact that
you have held this stock throughout these iterations, and you've seen the
fact that there was this controlling shareholder.
Did you sort of worry this might ever evolve from this corporate governance
structure, that particular your worry was the fact that three independent
board members have recently stepped down amid this M&A speculation.
You know, over the years I've mentioned, you know, the 41 years we've not seen
anything like this. I've never in all the years of owning
stocks that have dual class shares, I've never seen a scenario where the
shareholders are going to get a significantly larger premium than the
shareholders. And that's just something we've never
seen before. And there's been a lot of smart
investors that's, you know, factual over the years.
You know, Warren Buffett's been a shareholder.
We know Mario Gabelli and my friend Mario has been a shareholder.
We had other several good, smart people looking at this.
And we've always felt that people would do the rational thing and do the right
thing for all shareholders. That's what management's told us.
Frankly, that's what Cheri said over time.
And so we think that this is something that it was came as a real true
surprise. And it's something, again, like we've
never seen before. John, I watched the Masters on Paramount
Plus, I get my Champions League football through Paramount.
Plus, I liked Halo. What is it that you like about
Paramount's existing portfolio and offering?
Well, you started at the right place. They have extraordinary content that you
must see. The Super Bowl had great, great ratings.
Grammys were great. You mentioned the Masters.
They've got great scripted shows. The CSI franchise, the news franchise,
CBS Sunday Morning, 60 Minutes, CBS Evening News.
And this is robust history. But then you put on top of it this
extraordinary library with, you know, the paramount greats, Mission Impossible
and The Godfather. You could go on and on and on.
They've got Pluto, which is an extremely successful streaming service.
You've got worldwide assets, the Bob Barker shoes to run that are extremely
valuable and seem to get ignored by the analyst community and the value that's
there. So they have a well-diversified group of
assets, many hidden assets, real estate that hasn't completely been utilized.
Institutions like Showtime and BP that I wish they had found a way to have sold
earlier. But these are real true assets to this
company. And I think sometimes people get into
the group thinking the moment they're worried about the cord cutting and
they're forgetting to value all of the assets that Paramount Global has, you're
a value investor. You look at the value.
John, You also say you don't sell into chaos.
What do you do, though, if a deal with Skydance goes ahead?
Well, we have been looking at all of our options, and we did write a letter to
the board of directors explaining our position.
We've been, you know, of course, talking to expert legal counsel, and our general
counsel is terrific. And she's been on top of those those
issues. So we're looking at all of our
alternatives and we'll see how this all plays out.
But we would like to see this play out in a way that is very constructive
because it would be not a good thing for a skydance through trying to buy a
company where you're in litigation with all your shareholders or many of your
shareholders, I should say many of your shareholders, and at the same time, your
senior management is not going to be happy if the deal isn't fair for the
shareholders. That's the management team owns.
And we all know M&A is difficult in the best of circumstances, bringing getting
all the synergies done and all the tough calls that have to be made.
And it would be a difficult environment, I think, for them to be able to be
successful. While you could have such a cleaner deal
with an extraordinary company like Apollo and Sony.
