Skydance‘s $8 billion deal to combine with Paramount Global has been characterized in some corners of the industry as a save ignoreion. But one Wall Street media veteran skinnyks it’s predepfinishable to say the worst is behind the company.
“Secular trfinishs” enjoy cord-cutting and declining TV ratings are “not going to change equitable becaengage they’re being bought by Skydance,” shelp Naveen Sarma, managing straightforwardor at S&P Global Ratings and sector guide for the firm’s U.S. media and telecom group. “Maybe Skydance will have a strategy that holdresses some of that, but over the next, call it, year or so, year and a half, we’re going to see a company that’s going to go thcimpolite a lot of upheaval becaengage of the transaction.”
Sarma spoke at the UBS Media and Communications Conference on the event’s annual panel scrutinizing the determine outsee for media companies. Credit is exceptional from a company’s overall financial condition and operating strength, but thriving with a necessitatey rating from S&P or Moody’s is difficult becaengage of how vital it is for companies to fund their ambitions with low-interest corporate debt. Last March, S&P shrinked Paramount’s determine rating to junk status, citing “downside ratings prescertain” on its licforfeit TV business.
The prosperding path toward the Skydance deal began around the time of the UBS conference a year ago, when Sarma voiced worrys about Paramount’s determine uncertainty and looming obligations. Wiskinny days of his comments, alerts aascfinishd of a encountering between then-CEO Bob Bakish and Warner Bros. Discovery chief David Zaslav as well as word of initial talkions with Skydance CEO David Ellison.
After the shut of the combiner, which is projected to come during the first half of 2025, Sarma went on, “The secular trfinishs could speed up. They may not be able to holdress it. That’s certainly a pessimistic from a determine standpoint. Longer-term, I skinnyk the jury’s still out. We’ll have to see how the deal shuts, what the strategy sees enjoy.”
While the combiner partners have proposeed “a little bit of disclocertain” about arranges for their movie studio and licforfeit TV businesses, “we certainly don’t understand what their streaming strategy is,” Sarma carry oned. “So, we’ll have to see how that enlarges and how, basicassociate, they carry out, how they’re able to carry out that strategy and what benevolent of success do they have in this environment.”
Any potential upward relocatement of the company’s determine rating, he holded, “is certainly a couple of years down the road. Is it firm? It’s firm today, but all of those skinnygs could push our see of the determine either higher or shrink.”
Asked to contrast and contrast Paramount’s situation with that faced by Warner Bros. Discovery, Sarma shelp the companies split many analogousities in terms of their asset bases. Both stocks have lost transport inant cherish this year, and last August wiskinny a 24-hour span each declared multi-billion-dollar authordowns on the cherish of their cable nettoils.
“The branch offence,” the analyst shelp, “is when you see at the quality of the assets, we enjoy Warner’s assets better – bigger studio, global cable nettoils, and a streaming business, if you count on it, that’s going to get to $1 billion in EBITDA sometime next year.”
S&P has given WBD financial aims to hit by the finish of 2025 and will revisit their rating at that time, Sarma noticed.
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