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Paramount shares are rising as Wall Street sees a potential takeover of Sony and Apollo as “positive” for all shareholders

Shares of Paramount (PARA) rose as much as 15% on Friday after media reports about it private equity firm Apollo Global Management is in talks to acquire the media company through a joint buyout offer with Sony Pictures Entertainment.

The development comes after Paramount reportedly rejected an earlier offer of $26 billion in cash, including $14 billion in debt, for Apollo’s entire company. It also reportedly rejected a separate $11 billion offer for just the company’s studio operations. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)

“We view this as a positive development for all shareholders, including Shari Redstone,” CFRA analyst Ken Leon wrote in response to the report. Redstone and her family control Paramount through the holding company National Amusements.

Should a cash purchase occur for all PARA shares, it is likely that Apollo, as a US company, would acquire network assets (CBS and local TV station licenses), and that Sony could hold shares in the non-FCC license assets (movies). , television programs and others),” he said.

Paramount declined to comment on the report. National Amusements, Sony and Apollo did not immediately respond to Yahoo Finance’s request.

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The most important thing is right now in exclusive merger talks with David Ellison’s Skydance Media, according to a source familiar with the matter.

But shareholders have publicly raised concerns about the terms of the deal, which critics say unfairly benefits Redstone. Some have even threatened a lawsuit.

Amid the outrage, a proxy filing last week revealed that four Paramount board members will not seek re-election: Dawn Ostroff, Nicole Seligman, Frederick Terrell and Rob Klieger.

Ostroff, Seligman and Terrell currently serve on the board of independent directors charged with evaluating potential bids. It is unclear whether their departure will have any consequences for the ongoing Skydance talks.

‘Wars of fair market value’

Skydance is reportedly pursuing a two-step deal targeting Paramount’s holding company National Amusements (NAI). Redstone is currently chairman of NAI.

According to the Wall Street Journal, Redstone and Ellison have agreed to terms that would allow Skydance to take over Redstone’s controlling interest. Skydance would then merge its production studio with Paramount’s – a key condition of the deal, which must first be approved by an independent committee of directors at Paramount. It’s unclear what Ellison plans to do with the rest of the company.

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Skydance’s purchase of Redstone’s stake would result in a $2 billion cash windfall for the executive, while investors with non-voting shares would receive shares in the combined company (and a diluted shareholding).

National Amusements owns about 10% of Paramount’s equity and owns 77% of the voting stock – worth about $1 billion.

“Any merger discussion that forgoes a competitive offer in favor of an exclusive discussion with a single buyer, especially where the reported control premium differentiates the financial position of a single shareholder from that of all other shareholders, is averse to the fair market value of a company .” Longtime Paramount Global shareholder Ariel Investments said in a statement earlier this month.

As of December 31, 2023, Ariel had a stake of just under 2% in the company.

Shari Redstone, chairman of ViacomCBS and president of National Amusements, reacts as she celebrates her company's merger at the Nasdaq Market site in New York, U.S., December 5, 2019. REUTERS/Brendan McDermid

Shari Redstone, chairman of ViacomCBS and president of National Amusements, reacts as she celebrates her company’s merger at the Nasdaq Market site in New York, U.S., December 5, 2019. REUTERS/Brendan McDermid (REUTERS/Reuters)

Citi analyst Jason Bazinet further explained the panic among shareholders: “Many of the details that have been talked about in the press with Skydance [include] Skydance buys NAI’s stock and essentially gains control of Paramount without paying a premium to public shareholders.

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He said investors are more interested in an alternative bidder, which would “presumably pay a premium to all shareholders.”

Paramount has been losing money in its streaming business. Although losses have narrowed, the company still reported a direct-to-consumer (DTC) loss of $490 million in the fourth quarter. It’s also been plagued by declining linear TV revenues as more consumers cut the cord.

To combat the declines, Paramount has committed to several cost-efficiency plans, including layoffs, corporate restructuring, price increases and even a surprise dividend cut. But a possible sale has been on the table for months.

Alexandra Canal is a senior reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.

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