Sony and Apollo express interest in Paramount buyout as Skydance bid is considered.

• The Paramount board has received a formal letter from Apollo and Sony expressing their interest in a $26 billion takeover of the company.
• According to sources, a Paramount special committee will provide a recommendation on the next steps for a Skydance consortium as early as Thursday.
• Some Paramount investors have urged the board to negotiate with Apollo and Sony instead of the Skydance deal, as it would result in a premium for all common shareholders.

Apollo Global Management and Sony Pictures have shown interest in acquiring the company for approximately $26 billion, as per sources.

David Ellison's Skydance Media, backed by private equity firms RedBird Capital and KKR, is waiting for a decision from Paramount's special committee on whether the panel will recommend its bid to acquire the company to controlling shareholder Shari Redstone.

Skydance Media has not received any updates from the special committee, but it anticipates hearing the committee's recommendations on the next steps as early as Thursday, according to sources. The committee may suggest approving Skydance's offer, rejecting it, or present alternatives or modifications.

No representatives from Paramount, Redstone's National Amusements, the special committee, or Skydance were available to provide comment. Sony and Apollo also did not respond to requests for comment.

Paramount's options

The special committee and Redstone may extend an exclusivity window that ends Friday to continue negotiating with Skydance or to give Redstone more time to consider her options while still talking to Ellison's company. Alternatively, Skydance could walk away from the deal, which it has been negotiating for months.

If Skydance departs, Redstone may focus on negotiating a deal with Sony and Apollo, resulting in a premium payout for all common shareholders.

Sony and Apollo's formal letter of interest in Paramount Global shares caused the stock to rise more than 12%.

Redstone initially opted for exclusive talks with Skydance over an offer from Apollo, but still prefers a deal that would keep Paramount intact, as Skydance's offer would do, a source close to the matter stated. A private equity firm would likely dismantle the company through a series of divestitures to maximize profits.

According to a source, the Sony-Apollo deal would make Sony the majority shareholder and Apollo a minority shareholder. This arrangement could ease Redstone's concerns about a new buyer potentially splitting the company, as Sony is a major player in Hollywood and owns Sony Pictures.

Paramount Global is valued at $26 billion with a $22 billion enterprise value.

The special committee would likely need to review financing details and obtain assurances that there are no regulatory issues before merging with Sony, a non-U.S. entity. To achieve this, the committee would need to inform Skydance consortium that it wants to end exclusive talks, which would likely drive Skydance away as a bidder, according to sources.

The Skydance transaction has been met with approval by a number of Class B shareholders, including Gamco, Matrix Asset Advisors, and Aspen Sky Trust, who have all publicly expressed their dismay about the transaction. 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.

If Redstone were to argue that she feels more comfortable pushing forward at Paramount Global without a sale, it would be crucial to install a new CEO and provide a new plan to appease the restless common shareholder base, who would likely contend that the Apollo-Sony bid, if genuine, is in the best interest of shareholders.