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 conversations but cautioned that there are numerous obstacles that would need to be overcome before the sides could formally submit an offer. Apollo previously floated a $26 billion offer for Paramount by itself and before that it floated an $11 billion offer for the Paramount Pictures film studio on its own.
At present, Paramount Global is in the midst of an exclusive 30-day negotiating window with Skydance Media. Skydance and Paramount are trying to work out a deal that would merge Paramount into Skydance and bring in a new management regime led by Skydance CEO David Ellison. Paramount Global has set up a special committee of board members to consider offers and options for Paramount. That committee is understood to have rebuffed Apollo’s overtures out of concern that the private equity firm might have trouble completing the deal given the mood in Washington these deals. There’s also concern that a financial buyer like Apollo would be a less benevolent owner for challenged assets than a strategic buyer like Skydance with designs on growing the overall business.
The concept fueling discussions between Sony and Apollo are that Sony Corp. would contribute Sony Pictures Entertainment to the joint venture that would encompass Paramount Global. Sony and Apollo would both contribute cash to help finance the transaction that would take Paramount Global private. Sony would be the majority owner of the enlarged entity that also includes CBS. Sony and Apollo would have to come up with a structure for the deal for the 28 TV stations that CBS owns given that FCC rules bar a foreign entity from having majority ownership control of broadcast TV stations.
A representative for Apollo did not immediately respond to a request for comment. A Sony spokesman declined to comment.
The plan under discussion now between Apollo and Sony would mark a significant transformation for Sony Corp., which has had a Hollywood presence for nearly 35 years after buying what was then Columbia Pictures in 1990 for $3.5 billion. Sony Corp. has 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 entity. Skydance and its private equity partner RedBird Capital partners, would give Paramount and influx of capital that would chip away at its considerable $14.5 billion debt load. The Skydance transaction would also come with regime change as Ellison would serve as CEO of the enlarged company. Jeff Shell, the former NBCUniversal CEO who now steers RedBird alongside founder and managing partner Gerry Cardinale, would have a key role in a reconfigured Paramount Global.
As the basic outline of the Skydance transaction has emerged, some shareholders have been quick to voice concerns that controlling shareholder Shari Redstone will be enriched in the deal at the expense of others. If the Skydance deal happens, Skydance and RedBird would replace Redstone as the controlling shareholders, with nearly 80% of voting control in the company through preferred shares and about 10% of Paramount Global on an equity basis.
It’s understood that Skydance and RedBird are planning to do a roadshow to sell their deal to common shareholders if the sides can come to terms. The addition of Sony to the mix with Apollo may complicate the Skydance talks even with the exclusive window in place.
Source Agencies
