Paramount Global (PARA) stock closed down 2% on Wednesday, despite initially moving higher earlier in the session after Wells Fargo analyst Steve Cahall upgraded shares to Equal Weight from Underweight.
The analyst, who also upped his price target to $18 a share from the prior $12, cited "higher deal probability" after multiple outlets reported Shari Redstone could sell her family's controlling stake in the company.
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.
Shortly following the upgrade, Axios reported Wednesday that Paramount Global (PARA) CEO Bob Bakish and Warner Bros. Discovery (WBD) CEO David Zaslav met in New York City on Tuesday to discuss a possible merger.
Both companies declined to comment on the report, although Paramount has certainly become the industry's No. 1 pick for a breakup or merger.
Earlier this month, Deadline reported 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.
Acquiring the stake could allow RedBird and Skydance to take control of the company while avoiding a full purchase of it. The group could then offload undesirable assets from there or find a strategic partner.
"M&A headlines change our thesis around PARA given underlying asset potential," Cahall wrote in his note to clients. "We continue to believe that NAI might like to sell a controlling stake to a content operator that would protect the significance of Paramount Studios. i.e. willing buyer(s), willing seller."
Cahall added a future owner could potentially shut down Paramount+, which would allow the company to license its content — which includes NFL streaming rights, films, and original series like "Yellowstone" — to other streaming players.
Overall, the analyst estimated about $10 billion in post-tax proceeds for all divested assets.
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) $172 billion and Netflix's (NFLX) $217 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.
On Wednesday, Bloomberg reported Paramount is once again in talks to sell BET — this time to its CEO Scott Mills and former Blackstone executive Chinh Chu, who now runs private investment firm CC Capital Partners. A price of just under $2 billion is under discussion, according to the report.
"In early 2024 we expect additionally press reports as the situation unfolds," Cahall said. "Knock-on implications implied by the press include what happens with WBD/CMCSA (management has not commented). Media faces secular challenges, but those causes tend to have the effect of consolidation."
In addition to Paramount, Warner Bros. Discovery (WBD) and NBCUniversal (CMCSA) are two other names analysts think could be impacted by consolidation over the next year or so. As suggested by the Axios report, Wall Street watchers have said it's possible two of those three players could merge.
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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