Sony Pictures Entertainment is reportedly in discussions with Apollo Global Management to potentially place a bid to acquire Paramount. This development comes as Paramount is already engaged in merger talks with Skydance. According to the New York Times, investor opposition is complicating Paramount’s discussions with Skydance, which involves a $5 billion all-stock deal through Paramount’s parent company, National Amusements. Shareholders have threatened legal action if Paramount does not consider other offers, and recent reports suggest that the Skydance transaction may not be finalized within the 30-day exclusivity period ending on May 3.
Although Sony and Apollo have not yet made a formal bid, Apollo had previously considered acquiring Paramount for $26 billion, including debt. The potential Sony-Apollo bid would be an all-cash offer for the outstanding stock in Paramount, resulting in the company going private under joint ownership. Unlike the Skydance deal, which would involve National Amusements, the Sony-Apollo bid would not include this entity.
Other potential suitors have included Allen Media Group, which proposed a $30 billion deal including debt, and Warner Bros. Discovery, although those discussions have not progressed significantly. Acquiring Paramount would significantly bolster Sony Pictures Entertainment’s already extensive portfolio of TV and film franchises, enhancing its competitiveness against major rivals like Universal, Warner Bros. Discovery, and Disney. Sony Pictures Entertainment reported a profit of $281 million for Q3 2023, a 57% increase from the same period the previous year.
Paramount Global executives recently unveiled a plan to cut costs and seek a partner for its streaming service, Paramount+. However, shares fell nearly 5% as hopes for a merger with Skydance Media waned. Shari Redstone, Paramount’s controlling shareholder, rallied investors around a $500 million cost-cutting plan during the company’s annual meeting. This plan aims to drive value for shareholders and allow the company to invest in high-quality content. The strategy includes finding a strategic partner for Paramount+ and potentially divesting some assets, such as BET Networks.
A leading analyst suggested that the detailed presentation cast doubts on the likelihood of a deal with Skydance, which had submitted a revised bid to merge with Paramount. Redstone has not indicated whether she would accept the offer. The analyst speculated that Paramount’s leadership might prefer to remain independent.
Reports indicate that Redstone is unhappy with the updated merger deal from Skydance and is considering rival bids and options. Skydance CEO David Ellison recently reduced his initial $2.5 billion offer for National Amusements to provide additional cash for nonvoting shareholders. This move has reportedly displeased Redstone, leading her to consider an offer from Hollywood producer Steven Paul. Sources say Redstone is obliged to consider all offers for National Amusements.
The trio of CEOs currently leading Paramount—CBS President and CEO George Cheeks, Showtime/MTV Entertainment Studios President and CEO Chris McCarthy, and Paramount Pictures President and CEO Brian Robbins—have been steering the company since former CEO Bob Bakish’s departure in April. The analyst noted that the company’s announcement to seek a strategic partnership or joint venture for Paramount+ indicates a serious commitment to the turnaround plan if they decide to go it alone.
Paramount’s direct-to-consumer business, which includes Paramount+, is expected to lose $1.3 billion in 2024. Finding a strategic partner could accelerate the company’s path to streaming profitability. Robbins told shareholders that the plan aims to deliver higher revenue with lower costs, translating to higher earnings and better returns. McCarthy emphasized the importance of streaming as audiences shift from linear to streaming, while Cheeks added that Paramount would focus on transforming streaming to get closer to profitability and reduce non-content costs by around $500 million annually. This could involve selling assets like BET Networks.
Like other media companies, Paramount has faced financial struggles as traditional television declines and customers opt for streaming services. Paramount+ has yet to recover lost revenue. Since December 2019, when Redstone reunited CBS and Viacom, Paramount has shed about $18 billion in market value.
In April, Paramount entered exclusive merger talks with Skydance Media but allowed the exclusivity period to lapse as it evaluated a rival nonbinding offer from Sony Pictures Entertainment and Apollo Global Management. The latest offer from Skydance involves an all-stock transaction valued at $4.75 billion. Skydance and its deal partners, RedBird Capital and KKR, would infuse Paramount with at least $1.5 billion in fresh capital to pay down debt and offer to purchase 40% of Paramount’s nonvoting class B stock at $15 a share. This deal would give Ellison voting control over the larger media company, setting the stage for the merger.
Concerns over a potential merger have reached a fever pitch at Paramount Global. Redstone is reportedly souring on Skydance’s deal, which lowered the merger’s valuation, as she entertains other options. Paramount has rescheduled a planned employee town hall to June 25, citing ongoing speculation about a potential deal. The company’s co-CEOs told employees that they aim to speak with as much candor and transparency as possible by moving the date.
Source: New York Times, Reuters
