‍Sony and Apollo submit a letter indicating interest in a $26 billion acquisition of Paramount, as the company considers a bid from Skydance.‍

Apollo and Sony have formally proposed a $26 billion takeover of Paramount, while a Skydance consortium awaits a decision from Paramount's special committee. Some Paramount investors prefer the Apollo and Sony offer, as it promises a premium for all common shareholders, unlike the Skydance deal.

Sony Pictures and private equity group Apollo Global Management have approached the Paramount Global board with a proposal to buy the company for approximately $26 billion, insiders report.

This interest surfaces as David Ellison’s Skydance Media, supported by private equity entities RedBird Capital and KKR, anticipates a decision from Paramount’s special committee about endorsing its acquisition offer to Shari Redstone, the controlling shareholder.

So far, Skydance Media has not received feedback from the special committee but expects to learn of their recommendations for proceeding as soon as Thursday. The committee might endorse, decline, or suggest modifications to Skydance's proposal.

Representatives for Paramount, Redstone’s National Amusements, the special committee, Skydance, Sony, and Apollo have all chosen not to comment.

**Options for Paramount**

Should the special committee opt to keep negotiating with Skydance, or if Redstone needs more time to assess her choices while maintaining discussions with Ellison’s firm, they might extend their exclusive negotiation period, which concludes Friday. Alternatively, Skydance might exit the negotiations, which have been ongoing for several months.

If Skydance steps back, Redstone might shift focus to discussions with Sony and Apollo, offering a premium payout to all common shareholders.

News of Sony and Apollo’s formal interest propelled Paramount Global’s shares up over 12%, as first reported by The New York Times and The Wall Street Journal.

Initially, Redstone declined Apollo's proposal, choosing exclusive negotiations with Skydance. Redstone still favors a deal that maintains Paramount’s unity, similar to Skydance’s bid, according to sources. A private equity acquisition might lead to the company being dismantled for asset liquidation.

The proposal from Sony and Apollo designates Sony as the majority and Apollo as the minority shareholder. This arrangement could alleviate Redstone’s concerns about a new owner fragmenting the company, especially since Sony is a major player in Hollywood and owns Sony Pictures.

Sony and Apollo’s $26 billion bid places Paramount Global’s value above its current $22 billion enterprise value.

Nevertheless, the special committee will likely seek detailed financing plans and assurances against regulatory hurdles in merging with Sony, a foreign corporation. They would need to notify the Skydance group of their intent to terminate exclusive discussions, a move likely to discourage Skydance as a contender.

This decision would be supported by several Class B shareholders like Gamco, Matrix Asset Advisors, and Aspen Sky Trust, who have publicly criticized the Skydance deal. Skydance's final offer involved merging its entertainment assets with Paramount, raising $3 billion to buy out common shareholders at roughly a 30% premium based on an unaffected share price of $11, and paying nearly $2 billion to Redstone for her controlling interest.

Additionally, Redstone might consider continuing with Paramount Global without pursuing a sale, especially after the board recently replaced Bob Bakish as CEO. Establishing a new CEO and presenting a fresh strategic plan would be crucial to calming the restless base of common shareholders, who might argue that the Sony-Apollo proposal, if genuine, aligns best with shareholder interests.

Source: CNBC