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Sony/Apollo bid for Paramount could be worth as much as $29 billion - Source

April 19, 2024 8:14 AM EDT

Investing.com — The blockbuster sale of legendary Paramount Global (NASDAQ: PARA) to David Ellison's Skydance Media may be at significant risk of falling short as Sony (NYSE: SONY) and Apollo Global Management (NYSE: APO) prepare to make "a significantly better deal to all shareholders of the company," an insider told Investing.com exclusively this morning.

As the clock ticks on the 30-day period of exclusive talks between PARA and Skydance, which ends on May 3, insiders and analysts alike believe now that the odds are that the entertainment giant's controlling shareholder, Shari Redstone, will be forced to weigh in the Sony/Apollo proposal.

Last night, reports that the Japanese giant could be teaming up with former bidder Apollo for such an offer broke across the media, adding flame to the already complicated deal.

Consulted exclusively by Investing.com this morning, David Katz, President and CIO of Matrix Asset - an outspoken PARA shareholder - said the proposed offer would be "significantly better for all Paramount shareholders than the current one from Skydance ." He also added that the proposal could be worth as much as $29 billion. "Apollo had a $26 billion offer, and the board didn't engage with it. However, now that they're teaming up with Sony, they have the financing for an even better deal, which could end up at $28 or $29 billion if the board can convince the investors of the true value of the company's Asset," he told Investing.com.

"We urge the board to give it great consideration as, based on the speculation, the offer will be a much more attractive offer and economic benefit to all shareholders," David Katz, President and CIO of Matrix Asset, told Investing.com.

He also added that, with Sony in the picture, it would be much harder for Shari Redstone, the company's main shareholder, to keep on pursuing solely the Skydance offer. "A motivated buyer such as Sony would certainly have the firepower to make a bid that's interesting to everyone involved in the company - Shari included."

"Apart from the financial side, this proposal would be highly beneficial to Paramount's future growth given that Sony and Apollo are very well-run companies - which is not exactly the case for Skydance ," said David. "We urge the board of directors to consider this offer swiftly," he concluded.

Deal Could Fall Short Even Without Sony's Interest

The speculation comes amid growing distrust in the closure of the current Skydance bid due to severe backlash from both Paramount's Board of Directors and important shareholders of the company.

Led by legendary investor Mario Gabelli, Ariel Investment, and Matrix Asset Holdings, these shareholders claim that the deal would exclusively benefit Paramount's non-executive chair, Shari Redstone, at the expense of shareholder dilution, particularly amongst non-voting shareholders.

"The reported Skydance deal is fraught with litigation risk; it would have been difficult to execute even without the (unsurprising) internal disputes," Christopher Marangi, the Co-CIO of Gabelli Funds, told investing.com exclusively.

Jordan Posner, managing director of Matrix Asset, also expressed his concerns to Investing.com, "Ms. Redstone is solely operating in what she believes is HER best interests, which may be colored by her own financial situation, and has a total disregard for its impact or implications on other shareholders. In this case, to maximize her value, she is very comfortable doing something that is very dilutive to other shareholders."

In fact, the backlash against the current offer was so swift that it has already driven four members to resign from Paramount's Board of Directors, three of whom were part of the eight-person committee assessing the potential Skydance merger.

Having four members leave the BOD is not a good sign—that's a "hard no" vote for the Skydance deal," says Vijay Marolia, Co-founder at the Cash Square.

Phil Alberstat, Managing Director of Embarc Advisors, warns, however, that the Skydance deal could still move ahead via a series of buyouts. "National Amusements could opt to sell its shares, either wholly or partially, to another party, such as Skydance , thereby transferring control of Paramount."

Other Bidders?

Despite the advanced talks, the Co-CIO at Gabelli thinks that Paramount has what it takes to chart back to the growth path independently if needed. "We are not wedded to a sale – continuing as an independent entity with an accelerated transformation plan would likely create a bigger economic pie for all shareholders down the road," he said, adding, "I would not be surprised to leaks of additional strategic and financial buyer interest in some or all of Paramount."

Embarc Advisors' Alberstat also believes that should Skydance fall short, there is a likelihood that another bidder will step in. "I believe there are other potential bidders on standby who are waiting to see if Skydance can conclude a deal during the current exclusive 30-day negotiation period."

Vijay Marolia believes Paramount may also be under the radar of famous investors. "A white knight could come in at any point; think Bill Ackman or Daniel Loeb," he said.

Matrix Advisors' David Katz adds that big tech companies with 'entertainment aspirations' are also scanning the deal. "There should be a full and open sale process run to elicit interest from all possible bidders, without assuming that some might/could be excluded due to preconceived thoughts about potential regulatory objections (that can be overcome). This includes large tech companies with entertainment aspirations (Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOG)) and other streamers," he concluded.


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