Paramount Reportedly Moves on to Complicated Apollo/Sony Joint Offer; Skydance Deal Still Possible
If no deal for the sale or merger of Paramount Global comes to fruition, talks of a combination of Paramount+ with Peacock could revive.
The saga of Paramount’s ownership future has had more twists and turns than a Hollywood blockbuster. The narrative took a new direction this weekend, as Paramount’s exclusive negotiating window with David Ellison and his production house Skydance Media ended on May 3 without a deal being struck. Despite initially not initially appearing interested, Paramount is now considering an offer from Sony and Apollo Global Management, and various reports indicate that the media conglomerate hasn’t ruled out doing business with Skydance either. But the probability that Paramount will not find a merger and acquisition partner in the current business environment is rising, and if that happens, the company’s controlling shareholder Shari Redstone will have to determine what comes next for the legacy media outlet.
Key Details:
- Skydance is unlikely to continue making better offers now that its exclusive window with Paramount has expired.
- The Sony/Apollo deal could be complicated by regulations that don’t allow foreign companies to own U.S. broadcast channels.
- If all deal talks fall through, Paramount could resume discussions with Comcast about offering a bundle of Paramount+ and Peacock.
Skydance and Paramount first entered into exclusive negotiations on May 3, which was widely interpreted as a sign that a deal between the two sides was close. But the offer that Skydance made was always seen by Paramount investors as a sweetheart deal for Redstone, and a rather poor one for the rest of the shareholders. Mario Gabelli — whose investment firm represents clients holding the most Paramount shares of anyone besides Redstone — threatened legal action if the deal became a reality without significant adjustments.
Skydance made an offer characterized as its “best and last” in late April in a bid to improve the deal in the eyes of the other Paramount shareholders. But that deal was not enough to get it across the finish line with Paramount, and now the company is free to consider other offers. The New York Times reports that Paramount’s special committee assembled for considering M&A opportunities is now officially negotiating with Sony and the private equity firm Apollo Global Management on their joint bid.
The two firms have come together to make a $26 billion all-cash bid for Paramount, but there are regulatory concerns that could arise quickly even if the two sides do settle on financial terms. The biggest is a federal rule that stipulates foreign-owned companies like Sony (which is based in Japan) cannot own American broadcast channels such as CBS, which Paramount now controls. Apollo could take ownership of CBS in name, but Apollo purchased a majority stake in Cox Media Group in 2019, so an acquisition of CBS and its hundreds of local affiliates might violate regulations that restrict the number of TV stations that a single company can own.
What Happens if Paramount Doesn’t Agree to Any New Deals?
If Paramount cannot come to terms on any sale or merger agreements, the company will have to continue on the path laid out by former CEO Bob Bakish. Last week, the longtime executive resigned under pressure from the company, though in its most recent quarterly earnings report, Paramount revealed that it had gained another 3.7 million streaming subscribers and that it had continued to shrink losses from that segment of the company thanks to Bakish’s strategies.
Variety reports that if Paramount has to keep going it alone, it could circle back to discussions regarding the sale of BET Media Group to help slash its debt load. Paramount engaged with multiple parties about a possible sale of BET at two different points in 2023, but never got a satisfactory bid to follow through.
If no major deals surrounding Paramount’s ownership come to fruition this year, the company could also restart talks with Comcast about a potential combination of Paramount+ and Peacock. A team-up of the two streamers was discussed in February discussed in February, though later reports indicate that Bakish did not keep his bosses at Paramount regularly informed about the progress of those discussions, and the terms that he negotiated were not looked on favorably by Redstone.
But Bakish is out of the picture now, and the company is being guided by a three-headed “Office of the CEO” manned by George Cheeks of CBS, Paramount Pictures’ Brian Robbins, and Chris McCarthy, head of Showtime/MTV Entertainment Studios and Paramount Media Networks. Those three could wind up being much more than temporary figureheads for the company if its M&A talks with Skydance and Sony/Apollo both fizzle out.
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.