Shares of Paramount Global slid Tuesday following a CNBC report that Sony was “rethinking” its bid to acquire Paramount in conjunction with private-equity firm Apollo Global Management.
Earlier this month, Sony Pictures Entertainment and Apollo sent a nonbinding offer to Paramount Global’s board offering to take Paramount private for $26 billion in cash, a price tag that would include the assumption of debt. Paramount Global’s stock dropped more than 5% after CNBC’s David Faber reported Tuesday that “the likelihood of a bid [by Sony and Apollo] at least for the full company seems to be fading a bit.”
“There has not been an NDA signed by Sony [with Paramount Global] at this point, a nondisclosure agreement that you would typically sign so you can begin real due diligence,” Faber said on CNBC’s “Power Lunch.”
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Sony Group’s stock price dropped last week and “that may have given them some pause, not to mention, of course… the continued deterioration of the environment we know so well, namely the cable ecosystem, all of which has led to what I am told is at least quote ‘a rethinking’ of the Paramount bid,” Faber said. “That does not mean that there would not be some sort of bid potentially forthcoming, but will it be restructured?”
Sony and Apollo emerged as tag-team bidders as Paramount Global board’s special committee established to consider M&A proposals was evaluating an offer from Skydance Media (in a bid backed by RedBird Capital Partners and KKR) to merge Paramount and Skydance while keeping Paramount Global public. Under that proposal, Skydance would have acquired Shari Redstone’s National Amusements Inc., which is the controlling shareholder of Paramount Global. But the Paramount board’s committee let the exclusive negotiating window with Skydance lapse without going forward on that offer.
Sony may be revising its approach to possibly “take control of [National Amusements] and therefore exert control over the combined company in that way,” CNBC’s Faber speculated. He added that the Skydance-RedBird team has “continued to do their work. And so perhaps if you’re handicapping it at this point, given at least this latest development regarding Sony and Apollo, perhaps the Ellison-Skydance bid once again may come to the fore.”
Apollo did not respond to a request for comment. Sony Pictures reps did not immediately provide comment.
Industry analysts have pointed out the regulatory hurdles that a Sony-Apollo deal for Paramount would face, including likely resistance from the Justice Department to the consolidation of two of Hollywood’s biggest studios. Such a deal would also likely require approval by the Committee on Foreign Investment in the United States (CIFUS), an interagency group led by the Treasury Department that has the authority to block foreign transactions involving U.S. entities. In addition, FCC rules bar foreign entities from having majority ownership control of broadcast TV stations. If Sony and Apollo were successful in swinging a deal to buy Paramount Global, they would plan to sell off CBS and its owned stations, as well as the cable networks, the New York Times reported. Sony also would seek to sell the famous Paramount studio lot in L.A., per a Bloomberg report.
Meanwhile, the M&A discussions — such as they might be at the moment — come amid the backdrop of Paramount Global’s current talks with Charter Communications, the U.S.’s second-biggest cable operator, on a carriage-renewal deal. The two companies’ previous pact expired April 30; they temporarily extended that while they try to hash out a new agreement. The terms of a new deal with Charter will have a direct bearing on the outlook for Paramount’s TV segment, which has been suffering ongoing declines in revenue (down 8% in 2023) and operating income (down 12% last year).
Paramount Global is currently led by the three-headed “Office of the CEO” — CBS’s George Cheeks, Paramount Pictures’ Brian Robbins and Chris McCarthy, head of Showtime/MTV Entertainment Studios and Paramount Media Networks — after Bob Bakish was shown the door last month. The trio have told employees they’re prepping a “new long-term plan” for Paramount Global.
