Shari Redstone, Paramount Global, attends the Allen & Co. Media and Technology Conference in Sun Valley, Idaho on July 11, 2023.
David A. Grogan | CNBC
Sony Pictures and private equity firm Apollo Global Management have sent a letter to the company Paramount Global The board expressed interest in acquiring the company for about $26 billion, according to people familiar with the matter.
The formal expression of interest comes as David Ellison’s Skydance Media, backed by private equity firms RedBird Capital and KKR, awaits word from Paramount’s special committee on whether the panel will recommend its bid to acquire the company to majority shareholder Shari Redstone.
Skydance Media has not yet heard from the special committee, but expects to hear the special committee’s recommendations on next steps as early as Thursday, people familiar with the matter say. Paramount’s board could recommend approving or rejecting Skydance’s offer, or it could approach the Skydance consortium with alternatives or modifications.
Spokespeople for Paramount, Redstone’s National Amusements, the special committee and Skydance declined to comment. Sony and Apollo did not immediately respond to requests for comment.
Paramount’s options
If the special committee wants to continue negotiations with Skydance or Redstone wants more time to weigh her options while she’s still talking to Ellison’s company, the sides could extend an exclusivity window that ends Friday. It is also possible that Skydance will back out of the deal that has been negotiated for months.
If Skydance exits, Redstone could focus on negotiating a deal with Sony and Apollo that would give all common shareholders a bonus payout on their shares.
Paramount Global shares rose more than 12% after news that Sony and Apollo had submitted a letter formalizing their interest, as previously reported by The New York Times and The Wall Street Journal.
Redstone initially rejected an offer from Apollo in favor of exclusive discussions with Skydance. Redstone still prefers a deal that would keep Paramount together, as Skydance’s offer would do, a person familiar with the matter said. A private equity firm would likely tear the company apart through a series of divestitures to create value.
The Sony-Apollo offer would make Sony the majority shareholder and Apollo the minority shareholder, according to a person familiar with the letter. That could also allay Redstone’s fears that a new buyer could break up the company, as Sony is another major Hollywood player and owner of Sony Pictures.
A $26 billion offer for Paramount Global values the company higher than the company’s current enterprise value of $22 billion.
Still, the special committee is likely to want to consider financing details and seek assurances that the merger with Sony, a non-American company, will not pose regulatory challenges. That would require the special committee to tell the Skydance consortium that it wants to end its exclusive talks, which would likely oust Skydance as a bidder, people familiar with the matter say.
This move would be welcomed by a number of Class B shareholders, including Gamco, Matrix Asset Advisors and Aspen Sky Trust, all of which have publicly expressed dismay over the Skydance transaction. Skydance’s “best and final” offer included merging its entertainment assets with Paramount, raising $3 billion to buy out common shareholders at a premium of about 30% to an unchanged price of $11 per share, and the Paying Redstone nearly $2 billion for its majority stake.
Redstone could also argue that it’s easier for her to move forward at Paramount Global without selling. Earlier this week, the board fired Bob Bakish as the company’s CEO. Appointing a new CEO and providing investors with a new plan for the future would be essential to reassure the restive shareholder base, which would likely argue that the Apollo-Sony offer, if real, was in the best interests of the company shareholders.
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2024-05-02 18:55:12
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