Sony and private equity giant Apollo kicked things off previously with a preliminary bid of $26 billion, but what’s being contemplated now is not that, but something narrower. A look at the books is necessary to move forward in any case.
The non-disclosure agreement comes two weeks after a Paramount’s month-long exclusive negotiating window with David Ellison’s Skydance ended with no deal but the indie studio still hanging in, still interested.
After a few weeks passed with no Sony NDA, there’s was speculation its interest was waning as it considered the significant regulatory hurdles, and that’s possibly what’s at play in looking for a different kind of deal.
Sony just wants the studio. Some industry players believe Apollo mostly wants the studio lot as a real estate play. Paramount Global’s CBS broadcast assets might need to be sold off. Sony might not be able to own them under foreign ownership regulations, and may not want to. As things stand, Apollo’s current station holdings would put it over the Congressionally mandated broadcast cap.
Hollywood values the lot and is backing Ellison, although some question the circa $5 billion valuation put on the company as part of a proposed two-step deal. Skydance said its latest capital raise in the fall of 2022 valued it at over $4 billion. A merger of two studios envisioned in a Sony deal is, of course, unpopular with the town that saw downsizing when Disney acquired 20th Century Fox. Combining another two studios also poses a regulatory risk.
Paramount Global shareholders, on the other side, kind of hate the Skydance deal since it leaves the company public with the bulk of proceeds going to Redstone to acquire her controlling stake. Ellison, backed by Larry Ellison and Gerry Cardinale’s RedBird Capital, sweetened the pot once offering to buy out some shares from common shareholders. It did not appease them and its not sure anything would. It’s also not clear if they have a case to sue as they’ve been threatening legal action from day one. The Skydance deal would keep the company together at least at first and inject fresh capital into highly indebted company. Jeff Shell would step in to run things under David Ellison.
Shareholders loved the Sony-Apollo $26 billion cash offer. It will be interesting to see what they think with that no longer on the table.
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