Paramount Global (PARA) has entered an exclusive merger discussion with Skydance Media, according to a report from the Wall Street Journal. Paramount has paused talks with other potential bidders for 30 days. This comes as Apollo Global Management — the majority owner of Yahoo, Yahoo Finance's parent company — offered to buy Paramount for $26 billion on Sunday.

TD Cowen Managing Director of TMT — Media & Entertainment Doug Creutz joins The Morning Brief to discuss the likelihood of the deal being finalized and its lasting effects on the media landscape at large.

Creutz points out where the deal may struggle to be approved: "It's complicated by the fact that there's the Paramount stock, there's also NAI [National Amusements Inc.], which has a controlling voting interest in Paramount, which could be bought for significantly less. A purchase of NAI would allow somebody to control Paramount, [it] wouldn't necessarily help current Paramount shareholders. So, it depends on exactly what the discussions are that are going on."

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Editor's note: This article was written by Nicholas Jacobino

Video Transcript

SEANA SMITH: Paramount is in exclusive merger talks with production company Skydance, this is according to the latest reports here from the journal. Now the entertainment giant is also pausing any conversations with other bidders for 30 days while it does work out a potential deal with Skydance. And this coming after private equity firm Apollo Global Management offered to buy the entire company for $26 billion on Sunday. Let's talk about how likely it's going to be that Skydance will be one of those or be the one out of all of these bidders to acquire paramount.

Doug, my question to you, If this is the case, do you think this is a good move for Paramount? How are you looking at this from an analyst perspective? And just regarding the interest that we've seen in paramount, what does that then tell us more broadly about the media landscape right now?

DOUG CREUTZ: $26 billion-- and I mean, again, this has been reported, but, you know, there's a solid-- a lot of times there's devil in the details that you don't know what they are. But $26 billion for Paramount would be a very significant premium to the current stock price. Once you take out the debt, the net debt sitting on their balance sheet, you know, it values the stock in something in the 20s and stocks at $13 or whatever it's trading at right now. Like, that's a big premium. That's hard for a board to turn down. Now maybe Skydance is potentially offering more. It's complicated by the fact that, right, there's the Paramount stock, there's also NAI, which has a controlling voting interest in Paramount, which could be bought for significantly less.

A purchase of NAI would allow somebody to control Paramount wouldn't necessarily help current Paramount shareholders. So, you know, it depends on exactly what the discussions are that are going on whether they involve just NAI or the Paramount shares. As far as what it means, look, there have always been people with lots of money who want to be part of Hollywood, and sometimes they can be a bit price insensitive because owning a Hollywood asset is very glamorous and you may be seeing that at work again here, I'm not sure.

I think it's hard to make a business case right now for why Paramount should be worth $26 billion. Not impossible, obviously, but it requires you to make some pretty aggressive assumptions about improved earnings in the future. So, you know, we'll see how this plays out, you know, there's been a lot of chatter about Paramount for a while now, you know, things keep not happening. And until something actually happens, I think that's probably the default expectation is that somehow these talks will break down and nothing will happen. But if something does happen, you know, it wouldn't necessarily surprise me.

BRAD SMITH: Doug, thanks so much for taking the time here today. We got to leave things there. Doug Creutz who is the TD Cowen Managing Director and Senior Research Analyst covering the media and entertainment landscape and our very own Allie Canal joining us this morning.

DOUG CREUTZ: Thank you.

BRAD SMITH: Thank you. Certainly.