Paramount (NASDAQ:PARA) has decided to actively pursue a deal with Sony Pictures Entertainment (NYSE:SONY) and the private equity giant Apollo Global Management (NYSE:APO), according to an exclusive New York Times report. As a result, the media giant is engaging in talks with the two companies.
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Details of the Sony and Apollo Offer
Paramount’s special board committee met on Saturday and approved discussions with Sony and Apollo, who have offered approximately $26 billion in cash for the company. Additionally, the committee has chosen to continue negotiations with Skydance, founded by David Ellison.
According to the report, Sony’s bid for Paramount could encounter regulatory challenges, as government regulations restrict foreign ownership of broadcast networks. This limitation could hinder Sony’s parent company, based in Japan, from outright ownership of CBS. To tackle this issue, the bidding group may propose that Apollo, a U.S.-based company, holds the broadcast license for CBS.
Skydance Deal Could Be on its Way Out
The Skydance deal could be faltering, according to reports suggesting that its offer is struggling. As part of Skydance’s bid for Paramount, Skydance CEO Ellison and the private equity firms aim to raise new equity in the range of $4.5 billion to $5 billion. Out of this funding, approximately $2 billion will be paid to Redstone, with the remainder likely to be used to reduce debt.
Why Is Paramount Up for Sale?
It remains to be seen whether Shari Redstone, who controls 77% of the voting stock of National Amusements, the company overseeing Paramount, will support the combined Sony-Apollo bid for Paramount. National Amusements has the right to veto any deal. However, it has pledged to support the special committee’s decision.
Paramount could be up for sale as it faces significant headwinds, including the decline of cable TV and the decreasing profitability of its streaming services.
Is PARA a Buy or Sell?
Analysts remain sidelined about PARA stock, with a Hold consensus rating based on six Buys, eight Holds, and seven Sells. Over the past year, Paramount has declined by more than 20%, and the average PARA price target of $13.29 implies an upside potential of 3.1% from current levels.
