Sony and Apollo express interest in buying Paramount as part of Skydance bid

Sony Pictures and private equity firm Apollo Global Management sent a letter to Paramount Worldwide The board of directors has expressed interest in acquiring the company for about $26 billion, according to people familiar with the matter.

The expression of formal interest comes as David Ellison’s Skydance Media, backed by private equity firms RedBird Capital and KKR, waits for Paramount’s special committee to advise whether the panel will recommend its bid to acquire the company . to majority shareholder Shari Redstone.

Skydance Media has not yet heard from the special committee, although it hopes to hear the special committee’s recommendations on next actions as early as Thursday, according to people familiar with the matter. The Paramount panel could recommend approving or rejecting Skydance’s offer, or returning to the Skydance consortium with alternatives or modifications.

Spokespeople for Paramount, Redstone’s National Amusements, the Special Committee and Skydance declined to comment. Sony and Apollo did not immediately respond to requests for comment.

If the special committee wants to continue negotiations with Skydance, or if Redstone wants more time to consider its options while talking with Ellison’s company, the parties could extend an exclusivity window that ends Friday. It’s also possible that Skydance could walk away from the deal, which it has been negotiating for months.

If Skydance pulls out, Redstone could focus on negotiating a deal with Sony and Apollo that would give all common shareholders a premium on their shares.

Shares of Paramount Global jumped more than 12% on news that Sony and Apollo submitted a letter formalizing their interest, previously reported by The New York Times and The Wall Street Journal.

Redstone initially rejected an offer from Apollo in favor of exclusive negotiations 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 destroy the company through a series of divestitures to extract value.

The Sony-Apollo offer would make the former the majority shareholder and the latter a minority shareholder, according to a person familiar with the matter. It could also ease Redstone’s fears that a new buyer could break up the company, as Sony is another big Hollywood player and owner of Sony Pictures.

A $26 billion bid for Paramount Global values ​​the company higher than its current value of $22 billion.

Still, the special committee will likely want to review the details of the financing and obtain assurance that there are no regulatory issues related to the merger with Sony, a non-U.S. entity. To do this, the special commission should inform the Skydance consortium of its desire to end its exclusive negotiations, which would risk distancing Skydance from its offer, according to sources familiar with the matter.

The move would be applauded by a number of Class B shareholders, including Gamco, Matrix Asset Advisors and Aspen Sky Trust, all of whom have publicly expressed dismay over 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 a premium of about 30% on an unchanged per-share price of $11, and paying Redstone nearly $2 billion for its majority stake.

Redstone could also argue that she’s 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 presenting a new plan to investors would be key to appeasing a restless common shareholder base, which would likely argue that the Apollo-Sony offer, if real, is in the best interest of shareholders.