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

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

Patrick T. Fallon | AFP | Getty Images

World Paramount Shares jumped more than 5% on Friday after an investor known as Warren Buffett’s favorite banker piled into the media company’s controlling shareholder.

National Amusements, the majority voting shareholder of Paramount, announced Thursday afternoon that he has reached an agreement for a $125 million preferred stock investment in BDT Capital Partners, a subsidiary of BDT & MSD Partners.

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Some Buffett watchers have noticed a curious connection to the news. The chairman and co-CEO of BDT & MSD Partners is Byron Trott, long known as Buffett’s favorite and trusted banker. It was Trott who suggested that Buffett throw a $5 billion lifeline at Goldman Sachs during the 2008 financial crisis.

The connection didn’t stop there. Buffetts Berkshire Hathaway is actually Paramount’s largest institutional investor with a 15.4% stake, according to FactSet. Berkshire originally took the stake in the first quarter of 2022, and the bet is worth around $1.32 billion after Paramount’s recent sale.

Paramount has fallen more than 30% since the start of the second quarter after its quarterly earnings and revenue missed analysts’ estimates, and CBS’ parent company cut its quarterly dividend.

“So what we have now here is that Trott has a say in what happens at NAI. And NAI has a say in what happens to Buffett’s 15% stake in PARA” , said Don Bilson, head of event research at Gordon Haskett, in a note. “Where it goes is TBD but with Buffett and his banker in the mix, this 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, struck a negative tone about the steep dividend cut, while signaling his gloomy outlook for the streaming business.

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

It was unclear whether it was Buffett who bought the Paramount position or his investment lieutenants, Ted Weschler and Todd Combs, who each oversee $15 billion in Berkshire.

Upgrade from Loop

On Friday, Loop Capital upgraded Paramount to a holding rating after selling in light of BDT’s investment. The Wall Street firm said the bullish case is that financial pressure will force Paramount to find a buyer and shareholders will hit private market value.

“While we still believe a PARA turnaround will be a challenge, investor perception of the company could change with a motivated seller, smart bankers and the Berkshire purse strings,” Loop Capital said in a note. .


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