Trophy asset extras serve purpose at own expense

Tegna

27/08/2024 18:17

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are his own.)
    By Jonathan Guilford
       NEW YORK, Aug 27 (Reuters Breakingviews) - Obnoxious
sports fans often say that second place is the first loser. That
may be true for perennial trophy asset tire-kickers, too. Edgar
Bronfman Jr., scion of the Seagram liquor dynasty, has walked
away from an out-of-left-field run at a suffering media empire
on Monday, nixing a bid for Paramount Global  PARA.O  after
challenging on-again-off-again suitor David Ellison’s Skydance
Media. Competing bidders add ostensible tension to sale
processes. Problem is, if they regularly fail to follow through,
credibility can take a hit.
    Paramount – owner of broadcast network CBS, cable network
MTV, and its eponymous movie studio – has been a honey trap for
this crowd. As it goes with media assets, prestige is not always
coterminous with financial rationale. Bids often require some
crafty idea – like private equity firm Apollo Global
Management’s  APO.N  attempt to carve out Paramount’s studio –
or backers, including lenders, willing to take a risky punt.
    Bronfman tried courting such a crew, from movie producer
Steve Paul to “Mighty Ducks” actor Brock Pierce, but couldn’t
line up enough equity, Reuters reported. Other familiar names
also showed up on Paramount’s doorstep. Byron Allen – whose list
of failed bids includes broadcaster Tegna  TGNA.N , the
Washington Commanders football team, Walt Disney’s  DIS.N  ABC
network and more – lobbed in a bid. Even Warner Bros Discovery
 WBD.O  boss David Zaslav, who nosed around the process, fits
into this group, connected by industry bankers to a string of
names over the years.
    For bankers toiling to sell a company, there’s obvious
advantage to going a few rows deep in the rolodex for a
challenger. Allen, Bronfman, Zaslav and others really have
consummated deals, and so if there’s a serious buyer, drumming
up such interest can be a real threat. But such efforts can fall
flat, too. Look no further than banker emails unveiled in court
discussing the participation of self-described dealmaker Donald
Trump in the bidding for the Buffalo Bills. Financial advisers
acknowledged his long odds, but opined that his presence
"doesn't hurt." According to court testimony reported by the
Associated Press, he was not competitive.
    While such processes have worked in the past - Walmart
 WMT.N  heir Rob Walton paid a handsome, near-$5 billion price
for the Denver Broncos after Vista Equity Partners chief Robert
F. Smith poked around - too many failed Hail Mary attempts loom
large. Bankers representing serious potential buyers won’t stop
short of reminding the sell-side crew of previous flimsy
counterbidders. If certain names come up too often, they may
struggle to be taken seriously in future deals. And that’s
important when a prime asset comes around. No potential buyer
wants to walk in the door being the one who always seems to take
second place.
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    CONTEXT NEWS
    A consortium led by media executive Edgar Bronfman Jr. has
withdrawn its bid for Paramount Global, the company announced on
Aug. 26.
    Bronfman had previously submitted an offer for the U.S.
entertainment group during its “go-shop” period, a window in
which it may solicit alternative suitors. The company, which
comprises broadcaster CBS, cable channels including MTV and
movie studio Paramount Pictures, struck an $8 billion deal with
Skydance Media in July.
    RedBird Advisors, Bank of America, Moelis and The Raine
Group are acting as financial advisors to Skydance. BDT & MSD
partners are advising National Amusements, which holds a
controlling stake in Paramount. Rothschild is providing advice
to Paramount, while Centerview Partners is advising the
company's special committee. 

 (Editing by Lauren Silva Laughlin and Sharon Lam)
 ((For previous columns by the author, Reuters customers can
click on  GUILFORD/  
Jonathan.Guilford@thomsonreuters.com))