In the latest development in the Paramount Global M&A frenzy, Sony Pictures Entertainment and Apollo Global Management have attempted to delist Paramount with a $26 billion cash takeover bid.
As first reported by The Wall Street Journal, Sony and private equity giant Apollo submitted letters to Paramount Global on Wednesday outlining a nonbinding proposal that would involve the assumption of debt and be negotiable, and would value the company at a premium to its current enterprise value of $22 billion.
The tag-team takeover bid comes at a time when a special committee of the Paramount Global board of directors formed to consider M&A proposals is considering Skydance Media’s best and final proposal to combine Paramount with Skydance, while Paramount Global is keeping its takeover bid on the stock exchange. Paramount Global majority shareholder Shari Redstone is known to favor closing a deal with David Ellison’s Skydance, whose bid is backed by Redbird Capital Partners and KKR.
Representatives for Paramount Global and a special committee of the board declined to comment. Representatives for Apollo and Sony Entertainment did not respond to requests for comment.
Paramount Global shares rose 13% on news of Apollo and Sony Entertainment’s proposed acquisition, closing Thursday at $13.86 per share.
It’s unclear how Paramount’s board will handle the Sony and Apollo offers after rejecting an earlier offer from a private equity firm. The exclusive negotiation period between the company and Skydance ends on Friday (May 3), but negotiations between the parties may extend beyond that period.
If it goes through, the Sony Pictures-Paramount Pictures merger would likely result in mass layoffs, bringing the number of major Hollywood studios from five to four following Disney’s 20th Century takeover. It will increase. Sony, which acquired Columbia Pictures in 1990 for $3.5 billion, is the industry’s largest studio operator without a broad direct-to-consumer streaming service.
Last month, it was revealed that Sony was considering a joint bid with Apollo for the entirety of Paramount Global. Apollo has offered more than $27 billion (including debt) for Paramount Global, and previously offered $11 billion to Paramount Pictures alone. All of Apollo’s previous proposals were rejected by a special committee of the Paramount Global Board of Directors.
Under the proposed acquisition with Apollo, Sony would become the majority owner of the combined company. Sony Corporation Sony Pictures Entertainment would be in a joint venture with Paramount Global. Both Sony and Apollo would contribute cash to help finance the acquisition. It is unclear what will happen to the 28 local television stations owned by CBS. Because FCC rules prohibit foreign companies (such as Tokyo-based Sony) from acquiring majority ownership of television networks, Sony would have to create a separate ownership structure in the U.S. for the network group.
In the Skydance scenario, Redstone would sell his stake in National Amusements, which owns 77% of Paramount Global’s voting stock, to Skydance, which would then merge with Paramount Global in an all-stock deal worth Skydance approximately $5 billion. Paramount Global would remain a publicly traded company. Redstone stands to receive up to $2 billion from the Skydance-NAI deal. In addition, Skydance will pay a premium for Paramount Global shares and pay the company $3 billion to repay debt. Ellison will serve as CEO of the Paramount-Skydance merger, while Jeff Ellison, former CEO of NBCUniversal and chairman of Redbird’s sports and media division, will report to founder and managing partner Jerry Cardinal. Mr. Shell will assume an important management role.