Sign in Subscribe
Film and video production companies

Viacom Wins Bidding War for Paramount Communications in $9.75 Billion Deal

Strategic Insights

— 2 min read

Viacom has emerged victorious in its five-month battle with QVC Network for control of Paramount Communications, securing the necessary 50.1 percent of Paramount shares to seal the deal. The acquisition, announced last night, will bring Viacom's total debt to $10.2 billion, with cash flow estimated at $1.7 billion. The combined company, which includes Blockbuster Entertainment Corporation, is expected to be a behemoth in the entertainment business, with sales of about $12 billion. However, concerns about the impact of the merger have already caused Viacom's class B stock to plummet in value.

Key Takeaways:

  • Viacom has acquired Paramount Communications in a $9.75 billion deal, ending a five-month bidding war with QVC Network.
  • The acquisition brings Viacom's total debt to $10.2 billion, with cash flow estimated at $1.7 billion.
  • The combined company, which includes Blockbuster Entertainment Corporation, is expected to have sales of about $12 billion.
  • Viacom's class B stock has plummeted in value, closing at $29.875, down $1.75, on expectations of a Viacom victory.
  • Concerns about the impact of the merger have already caused Viacom's debt load to become a concern, with some analysts predicting that the company will soon begin selling assets to reduce the debt.
  • The merged company will face severe depression in earnings due to heavy interest payments on its debt, but Viacom should be able to manage those payments.
  • New criticisms have emerged that the merged Viacom-Paramount might face greater financial pressures, with some analysts predicting that Blockbuster shareholders might vote against the merger with Viacom.
  • Blockbuster's chairman, H. Wayne Huizenga, has committed to voting for the deal, along with some colleagues and Philips Electronics, an investor, who control 23 percent of the stock.

Statistics:

  • $9.75 billion: the total value of Viacom's acquisition of Paramount Communications.
  • 50.1 percent: the necessary percentage of Paramount shares that Viacom secured to seal the deal.
  • $10.2 billion: the total debt of the combined Viacom-Paramount company.
  • $1.7 billion: the estimated cash flow of the combined company.
  • $12 billion: the expected sales of the combined company.
  • $29.875: the closing price of Viacom's class B stock, down $1.75.
  • $42: the value of Viacom's class B stock a month ago.
  • $59: the value of Viacom's class B stock before Viacom made its bid.
  • 18 million: the expected loss of Paramount for its third quarter, which ended on Jan. 31.
  • $600 million: the estimated interest and preferred dividend payments of the combined company.

Sources:

  • "Viacom Wins Bidding War for Paramount Communications," The New York Times, no date.
  • "Viacom and Paramount in $9.75 Billion Deal," The Wall Street Journal, no date.
  • "Paramount Communications, Inc.," Wikipedia, last accessed March 2023.
  • "Viacom, Inc.," Wikipedia, last accessed March 2023.
  • "Blockbuster Entertainment Corporation," Wikipedia, last accessed March 2023.

Read more