Paramount Global finds itself at a crossroads as the company weighs competing offers from Sony Pictures and private equity firm Apollo Global Management, as well as Skydance Media, backed by private equity firms RedBird Capital and KKR. The future of the storied media company hangs in the balance as controlling shareholder Shari Redstone and the board's special committee deliberate on the best path forward.
According to people familiar with the matter, Sony and Apollo have sent a letter to the Paramount Global board expressing their interest in acquiring the company for approximately $26 billion. The offer, which would make Sony the majority shareholder and Apollo a minority holder, comes as Skydance Media awaits word from Paramount's special committee on whether it will recommend its bid to acquire the company to Redstone.
Sources indicate that Skydance expects to learn the special committee's recommendations on next moves as early as Thursday, with the panel potentially advising to approve or reject Skydance's offer, or to propose alternatives or changes. The outcome of these deliberations could have far-reaching implications for Paramount's future, as well as the broader media landscape.
If the special committee desires to continue negotiating with Skydance, or if Redstone wants more time to consider her options while still engaging with Ellison's company, the parties could extend an exclusivity window set to expire on Friday. However, there is also the possibility that Skydance could walk away from the deal, which it has been negotiating for months.
In the event that Skydance withdraws its offer, Redstone could shift her focus to negotiating a deal with Sony and Apollo, which would provide all common shareholders with a premium payout on their shares. The Sony-Apollo offer values Paramount Global higher than the company's current $22 billion enterprise value, a factor that could sway Redstone's decision-making process.
However, sources indicate that Redstone still favors a deal that would keep Paramount together, as Skydance's offer would. The concern is that a private equity firm might dismantle the company through a series of divestitures to extract value. The involvement of Sony, another major Hollywood player and the owner of Sony Pictures, could alleviate some of these fears.
The special committee would likely want to review details on financing and ensure there are no regulatory challenges in merging with Sony, a non-U.S. entity. To do this, the committee would have to inform the Skydance consortium that it wants to end its exclusive talks, a move that would likely drive Skydance away as a bidder, according to people familiar with the matter.
This decision would be welcomed by a number of Class B shareholders, including Gamco, Matrix Asset Advisors, and Aspen Sky Trust, who have publicly expressed their dissatisfaction 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 about a 30% premium on an unaffected $11 per share price, and paying Redstone nearly $2 billion for her controlling stake.
Redstone could also argue that she is more comfortable pushing forward at Paramount Global without a sale. The recent removal of Bob Bakish as the company's CEO opens the door for installing a new leader and presenting investors with a fresh plan, a move that could be essential in appeasing a restless common shareholder base. However, these shareholders would likely argue that the Apollo-Sony bid, if genuine, is in the best interest of all shareholders.
