Sony And Apollo Make $26 Billion All Cash Offer For Paramount

It looks as thought the every-day Paramount buyout saga could finally be coming to a close, with a all-cash, $26 billion offer made by Sony and Apollo, according to the Wall Street Journal.

Apollo and Sony, led by Sony Pictures CEO Tony Vinciquerra and Apollo partner Aaron Sobel, presented a preliminary, nonbinding offer on Wednesday, the Journal reported on Thursday in an exclusive.

In this proposal, Sony would hold a major majority share, while Apollo would have a minor stake and no operational control. This bid comes amid a tumultuous sale process by Paramount’s main shareholder, Shari Redstone, which saw a shareholder uprising and the resignation of CEO Bob Bakish along with four directors.

Paramount’s board has been considering a merger with Skydance Media, led by David Ellison, and entered exclusive talks last month. The Wall Street Journal reported that with the exclusivity ending Friday, Paramount and its owner, Redstone, may start discussions with other interested parties.

Shareholders are upset over the potential Skydance merger, which favors Redstone with a premium for her voting share, while others would get shares in the merged entity.

Skydance recently upped its proposal, offering $3 billion to improve Paramount’s finances, a hike from $1.5 billion, and reduced payment to Redstone’s National Amusements.

Apollo previously made a $26 billion bid for Paramount, with $12 billion as equity and debt assumption, but concerns about financing put the offer in doubt, as also reported by The Wall Street Journal.

As for why the offer for Paramount is so tricky, Bloomberg’s Matt Levine laid it out earlier this week, writing out the key questions behind the company’s complex share structure:

• Paramount has about 655 million shares outstanding.

• Of those 655 million shares, roughly 41 million are Class A shares, which have voting rights; the rest are Class B shares, which don’t.

• The Class A stock trades at $22.37 per share as of Friday’s close; the Class B trades at $11.91. That gives you a combined equity market capitalization of about $8.2 billion.

• Figure you’d have to pay a premium to buy the whole company. Let’s say the total equity value would be $12 billion, roughly a 50% premium to the current price.

• But notice that you could take over the company — control the shareholder vote, elect new directors, vote for a merger, etc. — with just 21 million Class A shares. That would represent a majority of the Class A voting shares, but only about 3.2% of the total shares.

• In fact, 31.5 million Class A shares are owned by National Amusements, a company controlled by Shari Redstone, the daughter and successor of former Paramount mogul Sumner Redstone. Those shares represent about 77% of the voting stock, but less than 5% of the total stock.

• If you want to acquire Paramount, how much should you offer to pay for Redstone’s Class A stock? For the other Class A stock? For the Class B stock?

You can read his full analysis here.