Shari Redstone helped build Paramount Global into a sprawling media empire, but if Sony Pictures Entertainment and private equity giant Apollo Global Management manage to acquire it, they plan to unravel everything, according to three people familiar with the matter .
The plan calls for the CBS broadcast network, cable channels such as MTV and streaming service Paramount Plus to be auctioned off, said the people, who spoke on condition of anonymity and disclosed private information. Paramount Pictures — home to blockbusters like “The Godfather,” “Top Gun” and the “Mission Impossible” franchise — would be merged with Sony’s existing business.
Sony and Apollo, which last week submitted a non-binding expression of interest to acquire Paramount for $26 billion, are also likely to retain Paramount’s library of films and television shows as well as the rights to popular characters, including the Teenage Mutant Ninja Turtles and SpongeBob SquarePants. They have not yet outlined this plan to Paramount or its advisors.
A breakup of Paramount would mark a major changing of the guard in the entertainment industry. CBS and Paramount have been controlled by the Redstone family for decades, ever since media mogul Sumner Redstone assembled the sprawling conglomerate in a series of bold deals. His daughter Shari Redstone championed a deal in 2019 to reunite the company through a merger with CBS and remains Paramount’s majority shareholder.
Sony and Apollo are currently working with Paramount’s financial advisers on the next steps of their proposal, the people said. The two companies have not yet signed formal nondisclosure agreements or begun due diligence, a process that could take weeks.
Although it’s still early, the two bidders have already started imagining how a deal for Paramount might play out. The two would likely operate the company as a joint venture under Sony’s control, with a minority stake owned by Apollo, the people said. Sony would seek to combine the Paramount film studio’s marketing and distribution functions with its own operations and divest the remainder of the properties.
Over time, Apollo could sell its share of the joint venture back to Sony or another buyer. It’s not yet clear how big Apollo’s stake in the company will be, although the company plans to invest billions in the deal, one person said.
According to a person familiar with her thinking, a breakup of Paramount is not a preferred outcome for Ms. Redstone, who would prefer to see the company pass intact to another buyer. But it wouldn’t necessarily be a dealbreaker if the offer was compelling, the person said.
There are other applicants. Skydance, a media company founded by tech scion David Ellison, has been negotiating with Paramount for months about a possible deal for the company. Exclusive negotiations between Skydance and Paramount ended last week, shortly after Sony and Apollo expressed interest. However, Skydance is still interested in a possible deal.
Sony and Paramount have different approaches to the entertainment business, and a deal would likely result in a dramatic turnaround for Paramount. Unlike Paramount, which streams its content on Paramount Plus, Sony offers licenses its films and television shows to companies like Netflix and Disney. Sony likely wouldn’t change this approach in a deal with Paramount and would likely look to combine Paramount Plus with a rival service like Comcast’s Peacock or Warner Bros. Discovery’s Max.
Sony has long pursued Paramount’s film studio. A few years ago, Sony executives approached Paramount to see if the company would be willing to sell or merge Paramount Pictures in a joint venture. However, Paramount rejected the offer, stating that it was only interested in a deal for the entire company. When Apollo made a bid for all of Paramount earlier this year, Sony decided to merge.
Any Sony deal would face regulatory hurdles. Regulations bar foreign owners from owning licenses for U.S. channels, which could prevent Sony – which is part of Japan’s Sony Group Corporation – from owning television stations affiliated with CBS. But they could sell the stations immediately or let Apollo apply for the license. They are also considering other options for the stations.
The deal would also likely require approval from the Committee on Foreign Investment in the United States, the body in Washington that reviews takeovers by foreign owners.
When Sony and Apollo decide to sell the Paramount assets, The companies believe there could be plenty of logical buyers, the three sources said. Warner Bros. Discovery, which does not have a broadcast network, could be a contender for the CBS broadcast network. Television network groups such as Nexstar and Tegna could be logical buyers for CBS-owned and operated television networks.
The hardest asset to sell would most likely be Paramount’s bundle of cable networks like MTV and Nickelodeon, but those could be sold to a television programmer looking for greater reach in negotiations with cable companies like Charter and Comcast.
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2024-05-09 01:25:39
www.nytimes.com
