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Paramount shares pop after BDT Capital bets on the media giant’s key shareholder

The Paramount logo is on display at Columbia Square on Sunset Blvd on March 9, 2023 in Hollywood, California.

Patrick T Fallon | AFP | Getty Images

Paramount Global Shares rose more than 5% on Friday after an investor known as Warren Buffett’s favorite banker acquired the media company’s controlling shareholder.

National Amusements, Paramount’s majority shareholder, announced on Thursday afternoon that it has entered into a $125 million preferred equity investment agreement through BDT Capital Partners.

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Of highest importance

Some Buffett observers noted an odd connection to the news. BDT Capital is chaired and co-CEO by Byron Trott, who has long been known as Buffett’s preferred and trusted banker. It was Trott who suggested Buffett bet one $5 billion lifeline at Goldman Sachs during the 2008 financial crisis.

That was not the end of the connection. According to FactSet, Buffett’s Berkshire Hathaway is Paramount’s largest institutional investor with a 15.4% stake. Berkshire initially acquired the stake in the first quarter of 2022, and the bet is worth about $1.32 billion following Paramount’s recent sell-off.

Paramount is down more than 30% since the start of the second quarter thereafter Quarterly earnings and sales fell short of analysts’ estimates, and the CBS parent company cut its quarterly dividend.

“So what we have here is that Trott has a say in what happens at NAI. And NAI has a say in what happens to Buffett’s 15 percent stake in PARA,” Don Bilson, Gordon Haskett’s head of event-driven research, said in a note. “Where this goes remains to be seen, but with Buffett and his banker involved, the situation is more interesting today than it was at the start of the week.”

“Not good news”

Asked about Paramount at Berkshire’s annual shareholder meeting in early May, Buffett, 92, was negative about the big dividend cut while signaling his bearish outlook for the streaming business.

“It’s not good news when a company exceeds or cuts its dividend drastically,” Buffett said. “The streaming business is extremely interesting to look at… there are a lot of companies doing it. And you need fewer companies, or you need higher prices. And, well, you need higher prices, otherwise it doesn’t work.”

It was unclear if it was Buffett who bought the Paramount position or his investment vices Ted Weschler and Todd Combs, who each manage $15 billion at Berkshire.

Upgrade from Loop

Loop Capital on Friday Paramount upgraded from a sell given the BDT investment to a hold rating. The Wall Street company said the bull case is that financial pressures will force Paramount to find a buyer and shareholders will realize private market value.

“While we still believe a turnaround at PARA will be challenging, with a driven seller, savvy bankers and Berkshire’s wallet, investor perceptions of the company could change,” Loop Capital said in a note.



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