(CTN News) – After a year-long effort to sell the marquee book publisher, Paramount Global announced it would sell Simon & Schuster to private equity firm KKR & Co for $1.62 billion.
As a result of strong growth in Paramount’s streaming business, shares of the media company gained 4% in extended trading.
Despite a federal judge blocking a $2.2 billion sale to Penguin Random House last year, Paramount has been trying to offload Simon & Schuster, the publisher of authors such as Stephen King and Hillary Clinton.
According to CEO Bob Bakish on a post-earnings call, Simon Schuster is a fantastic asset, but it is not core to the company.
Bakish did not provide an update on the sale of the company’s other assets. BET Media Group, which includes the BET cable network, is under consideration for sale by the company.
As a result of the sale of Simon & Schuster, Paramount will receive gross proceeds of $2.2 billion, including a $200 million termination fee paid by Penguin Random House as well as the cash flow received during the process. Proceeds from the sale are expected to be used to pay down debt.
This move comes as the company seeks to bolster Paramount+, its streaming service, in an industry dominated by Netflix and Disney+.
A 39% growth in direct-to-consumer revenue, including Paramount+ and PlutoTV, helped offset a 29% decline in filmed entertainment revenue in the second quarter.
Refinitiv data indicates that total revenue was $7.62 billion, higher than estimates of $7.43 billion. In addition, the company’s adjusted profit of 10 cents per share exceeded expectations for it to break even.
Naveen Chopra, Paramount+’s chief financial officer, has promised “significant earnings improvement” next year as well as a 20% increase in average revenue per user by 2024.
A price increase was implemented for Paramount+ during the quarter and the integrated Paramount+-Showtime service was launched. Operating losses at its streaming unit narrowed to $424 million from $445 million a year ago.
The company faces risks from the ongoing strike by Hollywood writers and actors, which has disrupted the production of scripted series for the fall television season as well as halted film production.
Since most scripted series are no longer being produced, Bakish said CBS will fill its fall schedule with hits such as “Yellowstone” and streaming shows such as “SEAL Team”.
In addition, the company licensed the rights to the U.K. series “Ghosts” to complement the American series.
“Strikes are a challenge for marketing, although the film slate for the rest of the year is strong,” Bakish said, adding that it is too early to predict what impact they will have on 2024.