Shari Redstone, non-executive chairwoman of 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 global paramount The board of directors 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 heard anything from the special committee yet, although it expects to hear the special committee's recommendations on next steps on Thursday, according to people familiar with the matter. Paramount's panel could recommend approving or rejecting Skydance's offer, or it could come back to the Skydance consortium with alternatives or changes.
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 negotiating with Skydance, or Redstone wants more time to consider its options while still talking to Ellison's company, the parties could extend an exclusivity window that ends Friday. It is also possible that Skydance will abandon the deal, which it has been negotiating for months.
If Skydance pulls out, Redstone could turn its attention to negotiating a deal with Sony and Apollo, which would give all common shareholders a premium payment on their shares.
Paramount Global shares rose more than 12% following news that Sony and Apollo submitted a letter formalizing their interest, previously reported by The New York Times and The Wall Street Journal.
Redstone initially rejected an offer from Apollo in favor of exclusive talks with Skydance. Redstone still prefers a deal that keeps Paramount together, as Skydance's offer would, a person familiar with the matter said. A private equity firm would likely gut the company through a series of divestitures to extract value.
The Sony-Apollo offer would make the former a majority shareholder and the latter a minority shareholder, according to a person familiar with the letter. That could also calm Redstone's fears that a new buyer could break up the company, because Sony is another big Hollywood player and owner of Sony Pictures.
A $26 billion bid for Paramount Global values the company above the company's current $22 billion enterprise value.
Still, the special committee will likely want to review details about the financing and get assurances that there are no regulatory challenges to merging with Sony, a non-U.S. entity. To do this, the special committee would have to inform the Skydance consortium that it wants to end its exclusive talks, which would likely alienate Skydance as a bidder, according to people familiar with the matter.
That move would be applauded by several Class B shareholders, including Gamco, Matrix Asset Advisors and Aspen Sky Trust, who have publicly expressed dismay over the Skydance transaction. Skydance's “last and best” offer included merging its entertainment assets with Paramount, raising $3 billion to buy out common shareholders at a premium of about 30% over an unaffected price of $11 per share, and paying to Redstone almost $2 billion for its controlling stake.
Redstone could also argue that she is more comfortable moving forward at Paramount Global without a sale. Earlier this week, the board removed Bob Bakish as the company's CEO. Installing a new CEO and offering investors a new future plan would be essential to calming a restive base of common shareholders, who would likely argue that the Apollo-Sony bid, if real, is in shareholders' best interests.
