Sony Pictures Teams With Private Equity Firm to Buy Paramount Pictures

Sony Pictures is partnering up with the private equity firm Apollo Global Management in an attempt to buy Paramount Pictures. They sent a letter to the studio expressing interest in acquiring the company for about $26 billion.

This comes as David Ellison’s Skydance Media, backed by private equity firms RedBird Capital and KKR, awaits word from Paramount’s special committee on whether they will accept its bid to acquire the company to controlling shareholder Shari Redstone.

As of right now, that is up in the air. If for some reason that deal does not move forward, Redstone could turn her attention to negotiating a deal with Sony and Apollo, which would give all common shareholders a premium payout on their shares.

The Wall Street Journal also reported that Paramount Global shares jumped more than 12% on the news that Sony and Apollo submitted a letter formalizing its interest.

Redstone had already rejected an offer by Apollo in favor of working with Skydance as that deal would keep Paramount together. It;’s explained that a private equity firm would “likely tear the company apart through a series of divestitures to extract value.”

But, a $26 billion offer for Paramount Global is a higher value than the company’s current $22 billion value. It’s also more than what Skydance is offering.

Skydance’s “best and final” offer included “merging its entertainment assets with Paramount, raising $3 billion to buy out common shareholders at about a 30% premium on an unaffected $11 per share price, and paying Redstone nearly $2 billion for her controlling stake.”

The report explains that “the special committee would likely want to review details on financing and get assurances that there are no regulatory challenges in merging with Sony, a non-U.S. entity. To do this, the special committee would have to inform the Skydance consortium that it wants to end its exclusive talks, which would likely drive Skydance away as a bidder.”

It’ll be interesting to see how all of this plays out. It would be pretty wild if Sony Pictures actually ended up buying Paramount Pictures.

It seems like Redstone would rather work with Skydance, but then they also have to think about what’s best for the shareholders, and that would be the Sony and Apollo deal.

Source: CNBC