Paramount Global
Sony Pictures Entertainment and Apollo Global Management are considering a possible joint bid for Paramount Global.
News of the discussions was first reported by the New York Times. Sources close to the situation confirmed the talks but warned there were many hurdles to clear before the parties could formally present an offer. Apollo previously made a $26 billion bid for Paramount on its own, and previously made an $11 billion bid on its own for movie studio Paramount Pictures.
Paramount Global is currently in the midst of an exclusive 30-day negotiation window with Skydance Media. Skydance and Paramount are trying to work out a deal that would merge Paramount into Skydance and usher in a new management regime led by Skydance CEO David Ellison. Paramount Global has established a special committee of board members to consider offers and options for Paramount. That committee is believed to have rejected Apollo’s overtures out of concern that the private equity firm might have trouble closing the deal given the sentiment in Washington about these deals. There is also concern that a financial buyer like Apollo would be a less benevolent owner of contested assets than a strategic buyer like Skydance with plans to grow the overall business.
The concept fueling the discussions between Sony and Apollo is that Sony Corp. will contribute to Sony Pictures Entertainment in the joint venture, which will encompass Paramount Global. Sony and Apollo will inject cash to help finance the deal, which will take Paramount Global private. Sony will be the majority owner of the enlarged entity, which also includes CBS. Sony and Apollo will have to come up with a deal structure for the 28 television stations that CBS owns, given that FCC rules prohibit a foreign entity from having majority control over the ownership of broadcast television stations.
An Apollo representative did not immediately respond to a request for comment. A Sony spokesman declined to comment.
The plan, now being discussed between Apollo and Sony, would mark a significant transformation for Sony Corp., which has had a presence in Hollywood for nearly 35 years since it bought the then-Columbia Pictures in 1990 for $3.5 billion. Sony Corp. consistently denied years of persistent rumors that the company was ready to exit its Hollywood investment.
In the Skydance scenario, Paramount Global would remain a publicly traded company. Skydance and its private equity partner RedBird Capital partners will also give Paramount an influx of capital that will reduce its significant debt load of $14.5 billion. The Skydance transaction will also come with a regime change, as Ellison will serve as CEO of the enlarged company. Jeff Schell, the former NBCUniversal CEO who now runs RedBird with founder and managing partner Gerry Cardinale, will have a key role in the reconfigured Paramount Global.
As the outline of the Skydance deal emerged, some shareholders were quick to voice concerns that controlling shareholder Shari Redstone would be enriched in the deal at the expense of others. If the Skydance deal goes through, Skydance and RedBird will replace Redstone as the controlling shareholders, with nearly 80% of voting control in the company through preferred stock and about 10% of Paramount Global on an equity basis.
Skydance and RedBird are understood to be planning to hold a roadshow to sell their deal to common shareholders if the parties can come to an agreement. Adding Sony to the mix with Apollo could complicate Skydance’s negotiations even with the exclusive venue window.
