Welcome back to Dry Powder. I’m Bill Cohan.

Is there a credible buyer out there for the patchwork monster that is Paramount Global? I have my reservations, but based on my conversations around Wall Street, the company is certainly in play. In today’s issue, a closer look at who’s signing NDAs and poking around inside the tent.

We know that Byron Trott, the premier adviser to privately held companies at BDT & MSD Partners, has been hired by Shari Redstone to advise her on the potential sale of the family’s holding company, National Amusements Inc. NAI, of course, is where she houses her nearly 80 percent voting stake and her roughly 10 percent economic stake in Paramount, along with some aging New England movie theaters and about $1 billion of debt and another $125 million of preferred stock (owed to Trott’s firm). And we know Zaz & Co., at Warner Bros. Discovery, has hired Allen & Company to advise it on a potential acquisition of Paramount. David Ellison, son of Larry and the proprietor of Skydance Media, is partnered up with Gerry Cardinale, at RedBird Capital, and his crew of ex-Goldman bankers, to see about buying NAI. Before long, I suspect, Brian Roberts and Comcast/NBCU will be signing the Paramount NDA. Might as well get a free look inside the tent.

Foreign buyers, meanwhile, are presumably out of the picture for the simple reason that a foreign entity cannot own a U.S. broadcast network. Unless one were to find a partner to take CBS off its hands—a deal contingent on the overall deal, and therefore less appealing to Shari—I don’t anticipate any foreign entities participating in the fun. (A spokesman for Paramount Global did not respond to a request for comment about which Wall Street firm the company has hired to represent it in the sale discussions. And then, of course, it’s likely that at some point a special committee of the Paramount board of directors will have to hire its own adviser, given that the Redstones are all over this thing.)

I am beginning to wonder, more and more, whether Shari’s little dalliance with the M&A market will be a bust and whether anyone is interested—or capable of—buying the Frankenstein’s monster that is Paramount Global. One foreboding sign is the Paramount stock price. It’s certainly not acting like a stock in play, with the usual optimism abounding that a deal is imminent. Yes, things did get off to a rollicking start on December 8, after my partner Matt Belloni reported the news that the Ellison/Cardinale duo were thinking about buying NAI as a way to get control of Paramount. That day, the Paramount stock zoomed up 14 percent, to around $17 a share. That’s some material deal heat. But as various realities have kicked in since, the stock has drifted back down to below $15 a share. The news that Zaz and Bob Bakish, the C.E.O. of Paramount Global, had met for lunch in New York to talk about a variety of things, including a WBD deal for Paramount, did nothing for either stock; in fact, both stocks fell on the Axios report.

Usually, but not always, Mr. Market gets these things right. If Paramount were being pursued by a serious buyer, with the financial wherewithal to buy the company and without serious regulatory challenges, I can assure you that the Paramount stock would be zooming. But that does not appear to be happening, at least not yet.

Could Comcast find a partner to take CBS off its hands? I suppose so. At a (relatively low) price, a large private financial buyer, such as Apollo, Blackstone, or KKR could be enticed to buy Paramount’s “TV Media” businesses, which seem to be generating around $5 billion of “adjusted OIBITDA” these days, down from nearly $6 billion two years ago. How much would someone pay to catch that falling knife?

And if someone would, Comcast would be left with the money-losing “direct-to-consumer” businesses and the marginally profitable movie studio, which doesn’t come close to offsetting the losses in Paramount’s streaming businesses. My gut is that Brian will sign the NDA, take a look at a company I’m sure he already knows plenty about, and that will be the end of it. He’d be better served to go back to thinking about merging NBCU with WBD, come April 2024, and forget about Paramount. (WBD’s streaming segment was finally profitable last quarter on an adjusted EBITDA basis, after a year of ruthless cost-cutting, whereas Paramount+ lost a quarter-billion dollars, so there’s that, along with $43 billion of WBD debt.)

Ellison and Cardinale’s gambit for NAI is also looking more and more like a nonstarter, as my loyal readers know. In addition to the hard challenge of reaching an agreement with Shari on the value of the private NAI, Ellison and Cardinale would most likely have to figure out a way to refinance or repay the $11.2 billion or so of Paramount’s senior notes that contain a deadly “change of control” provision. I don’t see any financial buyer going down that route at the moment, given how challenging it would be in this credit environment to refinance that much debt on a company where the “adjusted OIBITDA” is falling. I admire the cleverness of the NAI approach, David and Gerry, but I just don’t see it happening.

What about the rumored partnering of Walmart with Ellison/Cardinale? That would be a wild card, to be sure. Could Walmart—which has a market value of $450 billion and an existing Paramount+ deal with its customers—step up and buy the linear TV and streaming assets that Skydance doesn’t want and help the Dynamic Duo either refinance Paramount’s senior notes, or defeat the “double trigger” covenant in the senior notes indentures, thereby convincing the credit rating agencies not to downgrade Paramount’s credit rating?

Yes, that’s possible. It’s also unlikely, and way off-brand. (Walmart still is not responding to a request for comment about its potential involvement with Ellison/Cardinale.) By the way, I’m not picking on David and Gerry, here; any financial buyer, or a buyer who reads like a financial buyer, will have this challenge to contend with if it wants to buy NAI.

On the one hand, you have to give Zaz credit for being able to consider a deal at all for Paramount, at this moment, without getting laughed out of Tinseltown. He obviously can’t ink any deal until April, according to the Reverse Morris Trust rules under which he bought WarnerMedia in April 2022. But he can kick the tires until then, and with some degree of assurance that someone else won’t scoop up the company while he’s watching the clock.

But he, too, faces serious challenges in getting a deal done. Will the Biden regulators allow a combination of CNN and CBS? That’s probably less of a deal killer than a combination of CBS and NBC. Zaz would also be at regulatory risk in trying to combine the Paramount movie studio with the Warner Bros. movie studio, just as Brian would struggle to combine Universal and Paramount. Tough calls, from a regulatory perspective. Then, there is the mountain of debt that would result from the combination. WBD now has $43 billion of net debt. Paramount has $14 billion of net debt. Both are on the BBB cliff. Would the combined company, with $57 billion of net debt, fall right over the edge into junk territory? That’s a real possibility, especially since Paramount’s EBITDA is falling, and WBD EBITDA is still less than Gunnar and Zaz had originally forecasted. That would, of course, require the aforementioned $11.2 billion refinancing of the Paramount senior notes.

Incredibly, I suspect that Zaz and Gunnar could find banks to refinance that Paramount debt as well as provide other balance sheet cleanups that they would want as part of the deal. Despite all the animosity he’s stoked in the creative community, Zaz been able to retain the confidence of Wall Street’s bankers as a result of paying down a meaningful chunk of WBD’s debt and increasing WBD’s free cash flow, which Peter Supino, at Wolfe Research, pegged at nearly $7 billion for the fourth quarter of 2023 and the full year of 2024. In other words, but for the significant regulatory challenges, which I suspect he would find a way to overcome, Zaz might be able to pull this off from a financial point of view, which would have seemed utterly unlikely in April 2022. (The WBD stock is actually up 24 percent in the last year.)

If Zaz wants to try for this deal, he’ll have to use all his wily charms to convince his (non-Malone, non-Newhouse) shareholders that this combination makes sense. Zaz is the ultimate salesman, so he can do it, of course. But he’s going to have to put his mind to it and make a compelling case, which still seems a tad elusive, at least to me anyway.

Tom Rogers, the longtime media executive and one of the co-founders of CNBC—and Zaz’s boss, once upon a time, when they both worked for GE and NBC—summed up this sales process elegantly the other day. He told CNBC that the deal smacks of desperation, but may be the best of each company’s bad options. “While this is not a panacea, it may be the best move both companies can make,” he said. “You have these legacy media companies now that are slashing their streaming content and marketing, raising prices—that’s not a great formula. They’re trying to cut costs as best they can with their legacy media properties, and then hoping for the best. But that hope really hasn’t come true.”

Rogers continued: “Cord-cutting is accelerating, ad sales are getting worse for legacy media companies, and overall, legacy media is declining faster than their streaming services are growing. So both have an incentive to do a deal here.”

Rogers said he thinks it’s all about how these two somewhat marginal companies survive in a rapidly changing media environment. “This is really [about], how do you survive for the next five years while linear is in decline but streaming is growing?” he asked. “How do you look forward five years from now to be one of the top three survivors? That is, when streaming has gotten to a point that it is the de facto way for everybody to watch television and that you’ve navigated the very choppy waters between now and then to survive as a much stronger company than you might if you go it alone. So I think that’s probably the way to look at this. In the meantime, it’s doubling down on [the] decline of legacy assets, which is obviously a very risky strategy for the near term, but maybe the best opportunity for these players in the long term.” Well said, as usual, Tom.