Don Chmielewski
(Reuters) – Paramount Global will end exclusive talks with Skydance Media without a deal, according to a person familiar with the discussions, allowing it to evaluate a competing bid for the home of “Mission: Impossible” and “SpongeBob SquarePants.”
Paramount shares rose 3% in extended trading.
A special committee of Paramount’s board of directors, created to evaluate the company’s proposals, is negotiating an exclusive deal with Skydance Media. This period of exclusivity was scheduled to end at midnight US Eastern Time on Friday (0400 GMT on Saturday).
Eleven O’Clock Overture from Sony (NYSE:) Pictures Entertainment and private equity firm Apollo Global Management (NYSE:) have expressed interest in acquiring Paramount Global as negotiations become more complicated, another person familiar with the talks told Reuters.
On Wednesday, the companies presented a non-binding offer letter signed by Sony Pictures CEO Tony Vinciquerra and Apollo partner Aaron Sobel, a source confirmed to Reuters. The $26 billion offer is a combination of cash and debt assumption.
That may have prompted the special committee to take action, especially after some shareholders raised concerns about David Ellison’s Skydance deal and urged Paramount to consider other proposals, including Apollo’s.
A source close to the Redstone family said Shari Redstone, who controls the Paramount media empire, would support a special committee review of a possible Sony-Apollo deal or any deal that would benefit shareholders.
Paramount’s special committee is set to meet Saturday to discuss the deal, the New York Times reported, citing two people familiar with the company’s plans.
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A spokesman for the special committee declined to comment.
Apollo also declined to comment to Reuters, which reported in April that Sony Pictures and Apollo were in talks about a joint bid. Paramount and Sony also declined to comment on this week’s Apollo-Sony offer, which was first reported by the Wall Street Journal.
The competing proposal comes at a turbulent time for Paramount.
Media empire Shari Redstone replaced Paramount CEO Bob Bakish with a trio of executives on Monday, and four independent board members are set to resign at the company’s annual shareholders meeting on June 4.
Bakish was once considered Redstone’s loyal assistant.
However, their relationship began to sour in May 2023 when he urged Redstone to support cutting the company’s stock dividend, saying it would boost Paramount’s flagging shares – a prediction that never materialized, according to two sources close to Redstone.
PARAMOUNT WRESTLING
Paramount, like other studios, is struggling to recover from last year’s months-long strikes by Hollywood writers and actors, a weak advertising market and falling cable subscriptions in the United States that have depressed profits in its television business.
Its Paramount+ streaming service also lags rivals Netflix (NASDAQ:) and Disney+ in subscriber numbers, although Redstone had hoped the 2019 merger of CBS and Viacom would help the combined company, later renamed Paramount Global, better compete.
Since then, Paramount shares have fallen more than 65%, losing more than $14 billion in market value.
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After its shares fell 7% in Friday’s trading session, Paramount has a market value of about $9 billion, according to LSEG. The media company’s debt is more than $14 billion.
The potential acquisition will help Sony Pictures increase its share of the North American box office. The studio took in about $1 billion at the U.S. and Canadian box office last year, compared with Paramount’s $842.4 million, according to Comscore.
Sony Pictures, a unit of the Tokyo-based Sony Group, says its activities span the production, acquisition and distribution of films and television shows, digital content creation and distribution, studio operations and the development of new entertainment products, services and technologies.
The group has over 3,500 film titles and famous franchises such as Jumanji, Resident Evil and James Bond. The combination of Sony and Paramount, whose film library includes Star Trek, Top Gun and The Godfather, would create a huge Hollywood studio.
This isn’t the first time Sony has gone after Paramount. Vinciquerra previously approached Paramount majority shareholder Shari Redstone about exploring the possibility of acquiring Paramount Pictures, according to two people familiar with the matter. According to one of the sources, at that time Redstone was not interested in splitting the company.
An expression of interest marks the beginning of a process that will require due diligence. There are also potential regulatory hurdles for Sony Pictures, the Japanese company that controls the CBS Paramount broadcast network.
A person familiar with the deal said they hope to assuage concerns about foreign ownership of the US broadcaster through a partnership with US company Apollo. The private equity firm acquired Cox Media Group’s television stations in a 2019 deal that required Federal Communications Commission approval.
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Sony will own a majority stake in the venture, a source previously told Reuters, and will manage Paramount, with Apollo a minority shareholder.