Paramount Global (PARA) stock surged as much as 14% on Friday after Deadline reported late Thursday private investment firm RedBird Capital, along with Skydance Media CEO David Ellison, were looking to acquire National Amusements' voting shares and take control of the media conglomerate.
Shari Redstone currently serves as the non-executive chairwoman of Paramount Global and president of her family's holding company, National Amusements (NAI), which controls the company through its class A shares.
Acquiring National Amusements shares could allow RedBird and Skydance to take control of the company while avoiding a full purchase. The group could then offload undesirable assets from there or find a strategic partner.
Paramount and National Amusements both declined to comment on the report. RedBird Capital and Skydance Media did not immediately respond to Yahoo Finance's request.
According to Deadline, RedBird and Skydance could be interested in Paramount Pictures and some of the company's other intellectual property.
National Amusements, which owns approximately 10% of Paramount's equity capital value, maintains 77% of voting shares — valued at around $1 billion, although that does not account for what could be a "meaningful control premium," Wells Fargo analyst Steve Cahall wrote in a note to clients on Friday.
Paramount has long been viewed as a potential acquisition target due to its small size relative to competitors. The company boasts a current market cap of just around $11 billion, compared to Disney's (DIS) $170 billion and Netflix's (NFLX) $199 billion.
The company recently committed to divesting non-core assets as it works to pare down debt and improve its balance sheet. Last quarter, it announced the sale of Simon & Schuster to investment firm KKR after the publishing giant's sale to Penguin Random House collapsed late last year. The $1.62 billion all-cash deal was completed in October.
Showtime and BET Media Group are two assets that have also recently been the subject of sale rumors.
"We've always been suspect of NAI's ability transact PARA," Cahall said of the potential deal. "We think NAI has traditionally been against a break-up (Sumner didn't want that). We don't think strategic buyers are interested in PARA as a whole, but rather just its studios (which have some ~$6 billion in licensing revenues)."
"If successful, we think Skydance/[RedBird] could be more willing to do what NAI wouldn't: keep what it wants and break-up the rest. This could change the equity's outlook," he said.
In Cahall's view, a Skydance/RedBird takeover could lead to the combination of Skydance with Paramount's existing studios and the shutdown of streaming service Paramount+, along with the possible sales of Pluto and linear TV assets.
"We think the probability of a deal is decent given Skydance is a credible buyer, PARA recently announced senior exec change of control packages and Ms. Redstone may have grown tired of Wall Street's drumbeat of media negativity and familial intrigue," he said. "Post very significant asset sales PARA NewCo could be an attractive growth/content company."
The analyst maintained his Underweight rating on the stock and $12 price target.
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at [email protected].
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance