Paramount Rejected $27 Billion Bid from Apollo Global Management for Entire Company, But Why?
The bid marks the second reported attempt by Apollo to buy Paramount, but David Ellison and Skydance appear to be in the driver’s seat to make a deal.
There appears to be real movement on the Paramount merger and acquisition front. This week, the company entered into exclusive negotiations with David Ellison, founder of Skydance Media, which means that the two companies have likely already agreed on some major deal points and are now ready to get into the gritty details. However, Skydance is not the only potential buyer that has expressed interest; a report from Variety indicates that Apollo Global Management submitted a $27 billion bid for the entirety of Paramount this week, but was rebuffed. It’s clear that Paramount prefers the Ellison/Skydance deal, and there could be several compelling reasons for this inclination.
- Apollo’s first bid to buy Paramount was an $11 billion offer for just its movie and TV studio.
- Paramount’s controlling shareholder Shari Redstone prefers to sell the company whole, rather than in pieces.
- Redstone’s desire to keep the company her father built from being dismantled piece by piece could have had a big part in the decision to go with Ellison’s bid.
Variety reports that Apollo’s bid was not even discussed by the special committee established by Paramount’s board of directors to discuss M&A possibilities. News of the bid’s rejection lends even more credence to the idea that a deal with Paramount is Ellison’s to lose; Paramount’s stock price jumped over 15% on Wednesday afternoon when news of the 30-day exclusive negotiating window between the companies first broke.
The $27 billion offer from Apollo was submitted on March 31 and was an all-cash offer. It was the second attempt by the private equity firm to acquire at least some of Paramount’s assets; in mid-March, Apollo’s $11 billion offer for Paramount's TV and movie studios became public knowledge.
At the time, insiders said that Paramount’s controlling shareholder Shari Redstone preferred a deal that would see all of Paramount sold together, instead of in pieces as Apollo’s initial offer indicated. That helps to explain why equity firm submitted the new $27 billion bid to acquire Paramount in its entirety, but now the question becomes why Paramount did not even consider the new offer before moving into exclusive negotiations with Skydance.
Is Paramount’s Legacy at Stake in Sale?
It’s important to note that while the value of both Apollo offers for Paramount were made public, the deal framework that Ellison and Paramount are currently working through has very few details that are widely known. There are no reports as of yet as to how much Ellison and his backing investment firm Redbird Capital have put on the table for Paramount, and it could be more than even the larger bid from Apollo.
As the process has gone along, however, it seems that another factor has arisen in the decision-making process: the legacy of Paramount. Shari Redstone is the daughter of Sumner Redstone, one of the biggest media moguls of the 20th century. Sumner Redstone guided Viacom in its 1999 acquisition of CBS, following his purchase of Paramount in 1994. In essence, Sumner built much of the Paramount Global that exists today, and his daughter may understandably not want to see that company stripped and sold for parts by a private equity firm.
Skydance and Paramount have a longstanding relationship, having produced “Mission: Impossible,” “Transformers” and “Star Trek” movies together. That could suggest that Shari Redstone is already comfortable with the way Skydance does business, and seeing Paramount merged with that production house would be a much better way to preserve the legacy of the company her father built.
As a private equity firm, selling Paramount’s assets to the highest bidder was always a high probability for Apollo. Federal regulations may have compelled it to sell CBS, as it already holds a majority stake in Cox Media Group, and purchasing the broadcast network may have bumped up against regulations regarding the percentage of audience reach that channel owners are allowed to have. Apollo could also have sold streaming assets like Paramount+, intellectual property like the rights to its biggest franchises, or anything else it wanted if its $27 billion bid had been accepted.
Barring a last-minute change in direction, it appears that a deal between Paramount and Ellison is just a question of time. Selling Paramount to Ellison and seeing it merged with Skydance appears to be the best option in Shari Redstone’s eyes, and Paramount’s special committee for sorting through M&A possibilities agrees to the point of being unwilling to even consider a $27 billion bid from Apollo Global Management.
Paramount Plus
Paramount+ is a subscription video streaming service that includes on-demand access to 40,000+ TV show episodes from BET, CBS, Comedy Central, MTV, Nickelodeon, Nick Jr. and more. The lineup includes “1883,” “Tulsa King,” “Star Trek: Discovery,” Nickelodeon’s “SpongeBob SquarePants,” and “PAW Patrol.” Subscribers can watch the NFL, college football, The Masters, college basketball, UEFA Champions League, UEFA Europa, Serie A, and NWSL. The service also offers the option to watch your live CBS affiliate. The upgraded ad-free package includes premium movies and shows from Showtime.