Shari Redstone, Paramount Global, attends the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, July 11, 2023 at.
David A. Grogan | CNBC
Sony Pictures and private equity firm Apollo Global Management have sent a letter to the Big global The board has expressed interest in acquiring the company for about $26 billion, according to people familiar with the matter.
The expression of formal 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 controlling shareholder Shari Redstone.
Skydance Media has not yet heard from the special committee, although it expects to hear the special committee's recommendations on next steps as soon as Thursday, according to people familiar with the matter. Paramount's panel could recommend approving or rejecting Skydance's bid, 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 her options while she still talks with Ellison's company, the parties could extend an exclusivity period that expires Friday. It's also possible that Skydance could walk away from the deal, which has been under negotiation for months.
If Skydance walks away, Redstone could turn her attention to negotiating a deal with Sony and Apollo that would give all common shareholders a premium on their shares.
Shares of Paramount Global rose more than 12% on news that Sony and Apollo had filed a letter formalizing their interest, as previously reported by The New York Times and 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 tear the company apart through a series of divestitures to extract value.
The Sony-Apollo bid would make Sony the majority shareholder and Apollo a minority shareholder, a person familiar with the letter said. That could also allay Redstone's fears that a new buyer could break up the company, as Sony is another major Hollywood player and the owner of Sony Pictures.
A $26 billion bid for Paramount Global values the company higher than its current enterprise value of $22 billion.
Still, the special committee would likely want to review the details of the financing and get assurances that there are no regulatory issues with the merger with Sony, a non-U.S. entity. To do so, the special committee would have to inform the Skydance consortium that it wants to end its exclusive talks, which would likely push Skydance away as a bidder, people familiar with the matter said.
The 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 their displeasure with 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 untouched $11 per share price, and paying from Redstone nearly $2 billion for its controlling stake.
Redstone could also argue that she would feel more comfortable moving on from Paramount Global without a sale. Earlier this week, the board fired Bob Bakish as CEO of the company. Installing a new CEO and giving investors a new plan for the future would be essential to mollify a restless common shareholder base, which would likely argue that the Apollo-Sony offer, if real, would be in the best interests of the shareholders.