Shari Redstone helped turn Paramount Global into a sprawling media empire, but if Sony Pictures Entertainment and private equity giant Apollo Global Management acquire it for $26 billion, they plan to split it all up, according to three people familiar with the discussions. agreement.
The plan would include auctioning the CBS broadcast network, cable channels such as MTV and the Paramount Plus streaming service, said the people, who asked not to be identified and shared private details. Paramount Pictures, home to blockbusters such as “The Godfather,” “Top Gun” and the “Mission: Impossible” franchise, would be combined with Sony’s existing business.
Sony and Apollo are also likely to retain Paramount’s library of movies and TV shows and the rights to well-known characters, including Ninja Turtles and SpongeBob SquarePants. They have not yet outlined this plan to Paramount or its advisors.
A Paramount breakup would represent a major changing of the guard in the entertainment industry. CBS and Paramount have been controlled by the Redstone family for decades, ever since media mogul Sumner Redstone brought together the sprawling conglomerate in a series of bold deals. His daughter, Shari Redstone, pushed for a 2019 deal to reunite it through a merger with CBS, and remains Paramount’s majority shareholder.
Sony and Apollo, which submitted a non-binding expression of interest in acquiring Paramount last week, are now negotiating with Paramount’s financial advisers about next steps, the people said. The two companies have not yet signed formal confidentiality agreements or initiated due diligence reviews, a process that could take weeks.
Although it’s still early, the two bidders have already begun to imagine how a deal for Paramount might play out. The two would likely operate the company as a joint venture controlled by Sony, with a minority stake owned by Apollo, the people said. Sony would seek to combine the marketing and distribution functions of the Paramount film studio with its own operations and sell the rest of the properties.
Eventually, Apollo could sell its stake in the joint venture to Sony or another buyer. It’s not yet clear what stake Apollo would have in the business, although the company plans to invest billions in the deal, one person said.
Breaking up Paramount is not the preferred outcome for Redstone, who would prefer to see the company passed intact to another buyer, according to a person familiar with his thinking. But it wouldn’t necessarily be a deal-breaker if the offer was compelling, the person said.
There are other suitors. Skydance, a media company founded by tech scion David Ellison, has been in talks with Paramount for months about a potential deal for the company. Exclusive negotiations between Skydance and Paramount expired last week, shortly after Sony and Apollo expressed interest. But Skydance remains interested in a possible deal.
Sony and Paramount have different approaches to the entertainment business, and a deal would likely result in a dramatic 180-degree turn for Paramount. Unlike Paramount, which streams its content on Paramount Plus, Sony It licenses its movies and television shows to companies like Netflix and Disney. Sony probably wouldn’t change that approach in a deal with Paramount and would likely look to combine Paramount Plus with a rival service, such as Comcast’s Peacock or Warner Bros. Discovery’s Max.
Sony has long been pursuing the Paramount movie studio. Several years ago, Sony executives approached Paramount to see if the company would be willing to sell Paramount Pictures or merge it into a joint venture, but Paramount rejected the approach, saying it was only interested in a company-wide deal. So when Apollo made a bid for all of Paramount earlier this year, Sony decided to get on board.
Any deal by Sony would face regulatory hurdles. The regulations restrict foreign owners from holding licenses for American broadcast stations, which could prevent Sony (which is owned by Japan-based Sony Group Corporation) from owning CBS-affiliated television stations. But they could get rid of the stations immediately or have Apollo apply for the license. They are also considering other options for the stations.
The deal would also likely require approval from the Committee on Foreign Investment in the United States, the panel in Washington that reviews acquisitions by foreign owners.
When Sony and Apollo decide to sell Paramount assets, The companies believe there could be many logical buyers, the three sources said. Warner Bros. Discovery, which does not own a broadcast network, could be a candidate for the CBS broadcast network. Television station groups such as Nexstar and Tegna could be logical buyers for CBS-owned and operated television stations.
The toughest asset to sell would likely be Paramount’s suite of cable networks, such as MTV and Nickelodeon, but they could be sold to a television programmer seeking greater scale in negotiations with cable companies such as Charter and Comcast.