Paramount Global: As the firm examines a bid from Skydance, Sony and Apollo send a letter indicating interest in a $26 billion takeover of Paramount.

An offer of $26 billion for Paramount Global places a higher value on the business than its present enterprise value of $22 billion.

TFD – Delve into the potential acquisition deal between Paramount Global and Sony-Apollo, the impact on shareholders, and the strategies for future growth.

According to persons familiar with the situation, Sony Pictures and the private equity firm Apollo Global Management expressed interest in purchasing the company for roughly $26 billion in a letter addressed to the Paramount Global board.

The official expression of interest coincides with the waiting period for word from Paramount’s special committee regarding whether to propose Skydance Media, led by Shari Redstone, the company’s controlling shareholder, or not. RedBird Capital and KKR are among the private equity companies supporting Skydance Media.

According to persons familiar with the situation, Skydance Media has not received a response from the special committee yet but anticipates learning about its recommendations for the committee’s next steps as soon as this Thursday. The panel from Paramount may suggest accepting or declining Skydance’s offer, or it may return to the Skydance consortium with revisions or other options.

Representatives from Skydance, Redstone’s National Amusements, Paramount, and the special committee declined to comment. Requests for comments were not immediately answered by Apollo or Sony.

Paramount’s choices

The parties may prolong the exclusivity window that expires on Friday if the special committee wishes to go on negotiating with Skydance or if Redstone needs more time to think through her options while still speaking with Ellison’s business. Additionally, Skydance may decide to back out of the agreement after months of negotiations.

Redstone might focus on arranging a deal with Sony and Apollo, which would provide all common shareholders a premium payout on their shares, if Skydance decides to leave.

Following earlier reports from The New York Times and The Wall Street Journal, Sony and Apollo filed a letter formally expressing their interest, which caused Paramount Global shares to surge more than 12%.

Redstone initially rejected an offer by Apollo in favor of exclusive talks with Skydance. Redstone still prefers a deal that would keep 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 offer would make the former the majority shareholder and the latter a minority holder, according to a person familiar with the letter. That could also assuage Redstone’s fears that a new buyer could break apart the company, because Sony is another large Hollywood player and the owner of Sony Pictures.

An offer of $26 billion for Paramount Global places a higher value on the business than its present enterprise value of $22 billion.

Nevertheless, it is expected that the special committee will want to examine the funding details and obtain confirmation that the merger with Sony, a non-US company, won’t present any regulatory obstacles. According to those acquainted with the situation, in order for the special committee to accomplish this, it would need to notify the Skydance consortium that it wishes to terminate its exclusive negotiations. This would probably cause Skydance to withdraw as a bidder.

Many Class B shareholders, such as Gamco, Matrix Asset Advisors, and Aspen Sky Trust, who have all openly voiced their displeasure with the Skydance deal, would support that action. Skydance’s “best and final” offer comprised paying Redstone around $2 billion for her controlling stake, combining its entertainment assets with Paramount, and financing $3 billion to buy out common stockholders at a roughly 30% premium on an unchanged $11 per share price.

Redstone might counter that she feels better moving forward at Paramount Global in the absence of a deal. The board fired Bob Bakish as CEO of the business earlier this week. Installing a new CEO and giving investors a new plan forward would be essential to assuage a restless common shareholder base, who would likely argue the Apollo-Sony bid, if real, is in the best interest of shareholders.