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While the partnership has yet to formally submit an official offer, insiders reveal that there are several obstacles that need to be addressed before any concrete steps can be taken. However, if successful, the deal would significantly bolster Apollo's efforts in securing a deal for Paramount.
Apollo had previously floated a $26 billion offer for Paramount, which was allegedly dismissed, and prior to that, it had offered $11 billion for the Paramount Pictures film studio. These proposals included a combination of equity and debt. Teaming up with SONY would alleviate cash or financing concerns for Apollo.
Under the proposed joint venture, Paramount Global would go private, with SONY assuming the lead role as the majority stake owner, while Apollo would hold the minority stake. This arrangement would also grant SONY ownership of Paramount's extensive library of films, which includes blockbuster franchises like "Star Trek," "Mission: Impossible," and "Indiana Jones."
However, the involvement of CBS, which is part of the enlarged entity of Paramount, could complicate matters for SONY due to certain Federal Communications Commission (FCC) regulations that restrict foreign ownership of U.S. broadcast stations. To address this issue, CBS would likely need to be divested or licensed to Apollo.
Despite the potential benefits, the proposed deal has faced criticism from some of Paramount's investors, who argue that its structure puts them at a disadvantage. They fear that Apollo, being a financial buyer, may prioritize challenging assets over growing the overall business.
This development comes at a time when Paramount has experienced a significant decline in value, losing over $16 billion since its formation through the reunion of CBS and Viacom in 2019. Despite the launch of its streaming service, Paramount+, the company has struggled to turn a profit, despite reporting subscriber growth.
Meanwhile, SONY has remained steadfast in its focus on traditional film production and distribution, having been a major player in Hollywood for nearly 35 years. The company gained prominence after acquiring Columbia Pictures for $3.5 billion in 1990.
While SONY and Apollo are in the spotlight, they are required to hold off for an exclusive 30-day negotiation period, as another potential buyer group also expresses interest in Paramount. Skydance Media and Redbird Capital are among the contenders, with negotiations ongoing until early May.
In the midst of these negotiations, Paramount's independent board of directors has extended the negotiation window to Skydance Media and Redbird Capital. Despite potential challenges, Paramount remains committed to delivering operating efficiencies and reducing its considerable debt.
Adding to the intrigue are other potential suitors, including Warner Bros. Discovery and Allen Media Group. While talks with Warner Bros. Discovery were short-lived, Allen Media Group reportedly remains interested in pursuing a deal.
Jeff Ian
