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Paramount shares soared after BDT Capital bet on the media giant’s major shareholder

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

Patrick T. Fallen | AFP | Getty Images

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

National Amusements, the majority voting shareholder of Paramount, announced Thursday afternoon that it has entered into an agreement for a $125 million preferred equity investment by BDT Capital Partners.

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Some Buffett watchers noticed a curious connection with the news. BDT Capital’s chairman and co-CEO is Byron Trott, long known as Buffett’s favorite and trusted banker. It was Trott who suggested that Buffett put a $5 billion lifeline into Goldman Sachs during the 2008 financial crisis.

The connection didn’t end there. According to FactSet, Buffett’s Berkshire Hathaway is actually Paramount’s largest institutional investor, holding 15.4%. Berkshire initially took the stake in the first quarter of 2022, and after Paramount’s recent sale the stake is worth about $1.32 billion.

Paramount is down more than 30% since the start of the second quarter, as its quarterly earnings and revenue missed analyst estimates, and CBS parent slashed its quarterly dividend.

“So what we have here now is Trott’s say on what happens at NAI,” said Don Bilson, head of event-driven research at Gordon Haskett. And NAI’s say on what happens to Buffett’s 15% stake. ” A Comment. “Where this goes is TBD but with Buffett and his banker in the mix, this situation is more interesting today than it was when this week began.”

‘Not good news’

When asked about Paramount at Berkshire’s annual shareholder meeting in early May, Buffett, 92, sounded negative about a big dividend cut, indicating his pessimistic outlook for the streaming business.

“It’s never good news when a company passes its dividend, or cuts its dividend dramatically,” Buffett said. “It’s very interesting to see the streaming business … a lot of companies are doing it. And you need fewer companies or you need higher prices. And, well, you need higher prices or it doesn’t work.” “

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

upgrade from loop

Loop Capital on Friday upgraded Paramount from Sell to Hold rating in light of BDT investment. The Wall Street firm said the bull case is that financial pressure will force Paramount to find a buyer and that shareholders will achieve private market value.

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

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