Sony, Paramount Sign Non-Disclosure Agreement, but $26 Billion Bid Likely Off the Table
Sony, Paramount Sign Non-Disclosure Agreement, but $26 Billion Bid Likely Off the Table
The longer the Paramount sale process drags out, the less likely it appears any major transactions surrounding the company will take place.
The merger and acquisition talks surrounding Paramount Global continue, but the company’s options are beginning to narrow. The first company to make a meaningful pursuit of Paramount was David Ellison’s Skydance, and when the two sides entered an exclusive negotiating period in April, many observers thought a deal was just a matter of time. During that window, Sony teamed up with the private equity firm Apollo Global Management to craft a $26 billion all-cash bid, in case Paramount and Skydance’s talks came to naught. Since the exclusive window with Skydance has lapsed, Paramount’s board has been considering the Sony/Apollo offer and, a new report from Bloomberg, it appears that things are moving forward as the two sides have signed a non-disclosure agreement. However, there are increasing signs that the Sony and Apollo offer could be significantly modified, and Paramount may simply decide the process has become too complex and take itself off the market for the foreseeable future.
Key Details:
- Sony only wants Paramount’s movie studio and would have to sell off big parts of the company to satisfy regulators.
- Paramount controlling shareholder Shari Redstone preferred the Ellison deal, but it was a non-starter with other company shareholders.
- Ellison has already sweetened Skydance’s offer for Paramount, and may not have a better deal to put on the table.
The signing of a non-disclosure agreement is an important step for Sony and Paramount. It means that the two sides can now get a look at each other’s books, and determine if moving forward with a sale of Paramount assets to the two companies makes financial sense. It is not a binding agreement to sell the company, but a key step in the due diligence necessary in an M&A process.
Various reports have indicated for weeks that even if Sony did buy 100% of Paramount, it would be most interested in the company's movie studio and intellectual property (IP). Indeed, Sony would likely have to divest itself of at least some TV assets owned by Paramount, since as a Japanese-based company, it’s not legally allowed to own an American broadcast channel like CBS. Sony reportedly would also want to ditch Paramount’s flagging cable channels as well as its streamers Paramount+ and Pluto TV, and Apollo’s main interest is in the real estate involved in Paramount’s storied Hollywood lot. The private equity firm wouldn’t be able to take control of CBS in a deal, as it would run up against a legally-mandated cap on how much reach one broadcaster is allowed to own thanks to its majority ownership stake in Cox Media Group.
Last week, reports emerged that Sony and Apollo were “rethinking” their bid. Now, Deadline is reporting that this could entail a smaller bid, one that won’t involve a purchase of the entirety of Paramount Global. That would spare the buyers having to sell off enough of Paramount’s TV assets to get approval for the deal from federal regulators.
Will Paramount Have to Go It Alone?
Paramount’s controlling shareholder Shari Redstone has wanted out of the company for months and preferred the Skydance/deal because it kept the company together and she stood to make billions in the process. Paramount’s other shareholders were highly dubious of the offer, to say the least, and many felt it rewarded Redstone at their expense.
Ellison has already sweetened the offer once in hopes of closing a deal, but it was still not enough to gain the approval of Paramount’s board. Redstone reportedly doesn’t want to simply jam through a deal no matter what; the feelings of other Paramount shareholders are important to her, as is trying to preserve the company her father Sumner Redstone spent decades building.
The signs are increasing that Paramount will simply be left to go it alone for a while. The company has seen good progress from Paramount+, which grew by 3.7 million customers in the first quarter and now has 71.2 million overall. But it no longer has a CEO thanks to the departure of Bob Bakish, and its three-headed “Office of the CEO” who could find themselves trying to figure out Paramount’s next steps if it finds itself without an M&A partner.
Paramount Plus
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