Paramount shares surge after BDT Capital bet on the media giant’s majority shareholder

Paramount Global Shares rose nearly 6% 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 an agreement for a $125 million preferred equity investment from BDT Capital Partners, a subsidiary of BDT & MSD Partners.

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

That was not the end of the connection. buffets Berkshire Hathaway is actually Paramount’s largest institutional investor with a 15.4% stake, according to FactSet. 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 after its quarterly earnings and sales fell short of analyst estimates and 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 is going 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 meeting in early May, Buffett, 92, was negative about the big dividend cut while signaling his pessimistic 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 upgraded Paramount from a sell to a hold rating in light of the BDT investment. 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.