While Paramount, home of the Top Gun and SpongeBob movies, continues to negotiate a merger with another media company, Skydance, a new suitor has emerged.
Sony Pictures Entertainment and investment firm Apollo Global Management are in talks to partner for a joint bid to buy Paramount, two people familiar with the situation said Thursday.
Paramount is still in exclusive talks with Skydance and the two companies have not made a formal bid, according to the people, who requested anonymity to discuss the sensitive negotiations. However, the potential deal with Skydance sparked a major backlash from investors.
Apollo previously approached Paramount about acquiring the company for at least $26 billion, including debt. However, Paramount's board pursued more advanced discussions with Skydance amid questions about Apollo's financing. A joint bid with Sony would almost certainly alleviate those concerns and add operational experience and additional capital to Apollo's already significant war chest.
Sony Pictures Entertainment CEO Tony Vinciquerra last week discussed collaborating with Apollo on a bid, the people said. The bid is an all-cash acquisition of all outstanding Paramount stock, effectively taking Paramount private through a joint venture.
One of the people said the terms of the joint bid are still being worked out and there is a possibility that Sony and Apollo will not make an offer to Paramount. One possible structure would be for Apollo to take a minority stake in the joint venture, with Sony becoming the majority owner and operating the company. At some point, Apollo could cash out its investment, perhaps by selling a stake to Sony.
If Sony wins the bid, it will likely operate Paramount Studios as a label within its own media empire, merging the studio's marketing and distribution departments with its own. It remains to be seen how CBS, one of Paramount's crown jewels, will fit into the combined company along with Paramount's fading cable channels.
National Amusements, which owns Paramount, has already signed a potential deal with Skydance, which is run by tech scion and Hollywood executive David Ellison. National Amusements is managed by Shari Redstone, who appointed a special committee of independent director advisors to consider Skydance's proposal. Skydance's proposal is opposed by several investors because it would give Mr. Redstone cash and Paramount shareholders stock in the new company.
Unlike Skydance, Sony and Apollo will not try to buy National Amusements.
Skydance's deal with Paramount will bring expertise to Paramount, including technology and animation know-how from Ellison's management team, including former Pixar executive John Lasseter. The plan calls for operational efficiencies and Skydance to enhance Paramount's streaming capabilities.
Paramount shares rose 11% in aftermarket trading.
The combination of Paramount and Sony would create a media giant that would bring a conglomeration of television channels and movie studios under the same corporate umbrella. But Mr. Vinciquerra has experience managing both television and studio assets, having worked at both Fox and CBS.