Shari Redstone, Paramount Global, attends the Allen & Company Media and Technology Conference on July 11, 2023 in Sun Valley, Idaho.
David A. Grogan | cnbc
Sony Pictures and private equity firm Apollo Global Management have sent a letter Paramount Global The board has 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 the company’s takeover bid To controlling shareholder Shari Redstone.
Skydance Media has not yet heard anything from the special committee, according to people familiar with the matter, although it expects to receive the special committee’s recommendations on next steps as early as Thursday. Paramount’s panel could recommend approving Skydance’s proposal or rejecting it, or it could come back to the Skydance consortium with alternatives or changes.
Spokespeople for Paramount, Redstone National Entertainment, Special Committee and Skydance declined to comment. Sony and Apollo did not immediately respond to requests for comment.
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If the exclusivity committee wants to continue negotiations with Skydance, or Redstone wants more time to consider its options while talking to Ellison’s company, the parties can extend the exclusivity window that expires on Friday. It’s also possible that Skydance could walk away from the deal it has been negotiating for months.
If Skydance walks away, Redstone could turn its attention to negotiating a deal with Sony and Apollo that would give all common shareholders a premium payment on their shares.
Shares of Paramount Global jumped more than 12% on the news that Sony and Apollo have submitted a letter of intent to formalize their interest, as previously reported the new York Times And wall street journal,
Redstone initially rejected Apollo’s offer in favor of exclusive negotiations with Skydance. A person familiar with the matter said Redstone still preferred a deal that would keep Paramount on board, as was Skydance’s offer. A private equity firm would likely break up the company through a series of divestitures to extract value.
The Sony-Apollo offer would make Sony the majority shareholder and Apollo the minority holder, according to a person familiar with the letter. This may also allay Redstone’s fears that a new buyer could break up the company, as Sony is another big Hollywood company and the owner of Sony Pictures.
The $26 billion offer for Paramount Global values the company at more than its current $22 billion enterprise value.
Still, the special committee will likely want to review details on the financing and get assurances that there are no regulatory challenges in a merger with non-US entity Sony. To do so, according to people familiar with the matter, the special committee would have to inform the Skydance consortium that it wants to end its exclusive negotiations, which would potentially eliminate Skydance as a bidder.
The move will be applauded by several Class B shareholders, including Gamco, Matrix Asset Advisors and Aspen Sky Trust, which have publicly expressed disappointment about the Skydance transaction. Skydance’s “best and final” proposal involved merging its entertainment assets with Paramount, raising $3 billion to buy out common shareholders at an approximately 30% premium to the unlevered price of $11 per share, and acquiring Redstone for its controlling stake. A payment of approximately $2 billion was involved.
Redstone may also argue that it is more comfortable moving forward at Paramount Global without a sale. earlier this week, The board removed Bob Bakish. As CEO of the company. Installing a new CEO and putting forward a new plan to investors will be necessary to reassure a restless common shareholder base, which will likely argue an Apollo-Sony bid, if genuine, is in the best interests of shareholders.