An 'Interesting' Bet By Buffett's Favorite Banker Turns Out To Be Successful For Paramount

Paramount Global experienced a significant increase in its shares, rising nearly 6% on Friday, following news of a substantial investment in its controlling shareholder by an investor known to be favored by Warren Buffett, a renowned banker. National Amusements, the majority voting shareholder of Paramount, announced an agreement on Thursday afternoon for a preferred equity investment of $125 million from BDT Capital Partners, an affiliate of BDT & MSD Partners.

‍

The connection to Warren Buffett attracted the attention of observers. Byron Trott, Chairman and co-CEO of BDT & MSD Partners, has long been recognized as Buffett's preferred and trusted banker. Trott played a key role in suggesting that Buffett provide a $5 billion lifeline to Goldman Sachs during the financial crisis of 2008.

‍

The relationship between Buffett and Paramount doesn't end there. Berkshire Hathaway, Buffett's investment firm, is the largest institutional investor in Paramount, holding a stake of 15.4%, according to FactSet data. Berkshire initially acquired this stake in the first quarter of 2022, and the investment is currently valued at approximately $1.32 billion, considering Paramount's recent decline.

‍

Paramount has experienced a decline of over 30% since the beginning of the second quarter, as its quarterly earnings and revenue fell short of analyst estimates, leading to a reduction in its quarterly dividend by its parent company, CBS. The recent involvement of Byron Trott in National Amusements, the controlling shareholder of Paramount, and Berkshire Hathaway's significant stake in the company has piqued the interest of market observers.

‍

Don Bilson, head of event-driven research at Gordon Haskett, commented on the situation, stating, "So what we now have here is Trott having a say on what happens at NAI. And NAI has a say in what happens to Buffett's 15% stake in PARA. Where this goes is TBD, but with Buffett and his banker in the mix, this situation is more interesting today than it was when the week began."

‍

When asked about Paramount at Berkshire's annual shareholder's meeting in early May, Warren Buffett, age 92, expressed a negative view regarding the substantial dividend cut, while signaling his pessimistic outlook for the streaming business. Buffett stated, "It's not good news when any company passes its dividend or cuts its dividend dramatically. The streaming business is extremely interesting to watch... there are a lot of companies doing it. And you need fewer companies or you need higher prices. And, well, you need higher prices or it doesn't work."

‍

It remains unclear whether it was Warren Buffett himself or his investing lieutenants, Ted Weschler and Todd Combs, who purchased the position in Paramount. Each of them oversees $15 billion at Berkshire Hathaway.

‍