Sony Pictures, in collaboration with private equity firm Apollo Global Management, has expressed interest in purchasing Paramount Global for an estimated $26 billion. This formal interest comes at a time when Skydance Media, backed by RedBird Capital and private equity company KKR, awaits Paramount’s special committee’s decision on whether they recommend Skydance’s offer as a viable choice to its primary stakeholder, Shari Redstone.
As of now, Skydance Media has received no feedback from this exclusive committee. They are, however, expecting to receive a recommendation this Thursday. Paramount’s committee could accept or reject Skydance’s offer outright or propose modifications or alternative propositions to Skydance’s consortium.
In the event that Skydance decides not to persist with their deal—a negotiation that has been going on for months—attention could move to Sony and Apollo. This switch would be financially profitable for all common shareholders.
News of Sony and Apollo’s formal expression of interest prompted a 12% increase in Paramount Global’s shares. This was previously reported by The New York Times and The Wall Street Journal.
Despite an initial rejection from Redstone in favor of Skydance, there are still preferences for a deal that would maintain Paramount’s structure, as it would be with Skydance. However, a private equity company would likely dismantle the company piece by piece to profit from the divestments.
The offer brought forward by Sony and Apollo, which would establish Sony as the majority stakeholder and Apollo as the minority, could put Redstone’s concerns about a potential dismantling of the company to rest. This is because Sony is a significant Hollywood player and also the owner of Sony Pictures.
Valuing Paramount Global at $26 billion in their offer, Sony and Apollo have exceeded the company’s current enterprise value of $22 billion. There are, however, several details that Paramount’s committee will want to clarify before moving forward.
These details include matters related to financing and regulatory concerns linked to merging with Sony, a non-U.S. entity. To proceed, the committee would have to inform Skydance’s consortium about ending exclusive negotiations—likely prompting them to withdraw their bid. This is expected to be met with approval by several Class B shareholders, including Gamco, Matrix Asset Advisors, and Aspen Sky Trust, who have all publicly voiced their disapproval of the Skydance transaction.
Factors at play include Skydance’s proposed merging of its entertainment assets with Paramount and its offer to raise $3 billion to buy out common shareholders at approximately a 30% premium. There is also a payout for Redstone of almost $2 billion for her controlling stake.
Redstone might contemplate that it’s more beneficial for Paramount Global to push forward without a sale. This decision follows the dismissal of the company’s CEO Bob Bakish earlier this week. A significant step in this process would be the appointment of a new CEO and developing a new strategic direction, which is essential to placate a likely restless common shareholder base. They would be inclined to argue that the Sony-Apollo bid, if official, would be the most beneficial to shareholders.
