Paramount Stock Is Rising on Seven-Year UFC Deal. What to Know.

Skydance and Paramount closed their merger deal last week. (Eric Thayer/Getty Images)

Stock in Paramount was rising Monday, after the company announced an agreement with TKO Group Holdings that will give Paramount exclusive media rights to all Ultimate Fighting Championship events in the U.S.

The seven-year deal, which begins in 2026, is worth an average of $1.1 billion a year, with payments weighted toward the back end of the term, the companies said. Paramount also intends to explore acquiring the rights to UFC outside the U.S. in the future.

As part of the agreement, the Paramount+ streaming platform will show UFC’s full slate of numbered events and ‘Fight Nights,’ with select events simulcast on sister network CBS, the companies said. UFC has traditionally distributed its mixed martial arts events through a pay-per view model rather than via streaming subscriptions.

Shares of the company, which is formally called Paramount, a Skydance Corporation, and trades under the ticker PSKY after Paramount and Skydance closed their merger deal on Thursday, climbed 3.2% to $10.85 ahead of the opening bell. TKO Group stock was rising 1.4%.

“Live sports continue to be a cornerstone of our broader strategy,” said Paramount CEO David Ellison in a statement. “The addition of UFC’s year-round must-watch events to our platforms is a major win.” We look forward to delivering this premium content to millions of fans in the U.S., and potentially beyond.”

The newly formed media conglomerate has already had a busy start to its first full week since the merger.

Seaport Research Partners analyst David Joyce upgraded Paramount to Neutral on Sunday, reversing a downgrade to Sell from last month.

“We are in the earliest innings of learning what can be done here, and Skydance’s ties to the technology world should surely help,” the analyst wrote in Sunday’s note. “Stay tuned as Episode 1 has just started.”

CEO Ellison said in a letter to investors last week that the company would look to scale up its streaming platform and integrate artificial intelligence into its studios division, although he didn’t share any updated financial forecasts. Those are likely to come when Paramount Skydance publishes its third-quarter earnings report in a couple of months’ time, according to Joyce.

The CBS owner’s stock has been a disaster over the past decade, tumbling 75% due to concerns about cord-cutting and soft advertising spending.

But there’s a lot to like about the company, a recent Barron’s stock pick, now that the Paramount-Skydance merger is finally done. The Ellison family’s deep pockets ought to give Paramount a boost: David’s father Larry Ellison is the world’s second-richest person, per Bloomberg. His net worth—mostly in the form of Oracle stock—has been estimated at $300 billion, trailing only Tesla CEO Elon Musk.

There could be more deals to come. Ellison’s letter suggested he may want to double down rather than pare back his asset base, and Joyce said the Skydance deal should bring “strategic vision, further merger synergies, and quick operational moves to accelerate the [streaming] platform…with the optionality of tech-oriented strategic M&A.”

While investors will want a little more detail, PSKY stock could be a good cheap bet if Ellison manages to turn the struggling entertainment giant around.

Write to George Glover at george.glover@dowjones.com