Shari Redstone helped build Paramount Global into a sprawling media empire, but if Sony Pictures Entertainment and private equity giant Apollo Global Management take over for $26 billion, they plan to split everything up, according to three people familiar with the deal discussions .
Under the plan, the CBS broadcast network, cable channels such as MTV and the streaming service Paramount Plus would be auctioned, said the people, who asked not to be identified sharing private information. Paramount Pictures – home to blockbusters such as “The Godfather,” “Top Gun” and the “Mission Impossible” franchise – would be combined with Sony's existing operations.
Sony and Apollo will also likely retain Paramount's library of movies and TV shows, as well as the rights to well-known characters including the Teenage Mutant Ninja Turtles and SpongeBob SquarePants. They have not yet presented this plan to Paramount or its advisors.
The breakup of Paramount would mark 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 the sprawling conglomerate together in a series of bold deals. His daughter, Shari Redstone, championed a 2019 deal to reunite the company through a merger with CBS, and remains Paramount's controlling shareholder.
Sony and Apollo, which last week submitted a non-binding expression of interest to acquire Paramount, are now in discussions with Paramount's financial advisers about next steps, the people said. The two companies have not yet signed formal nondisclosure agreements or begun due diligence, a process that could take weeks.
While it's still early, the two bidders are already starting to imagine how a deal for Paramount could unfold. The two would likely operate the company as a joint venture controlled by Sony, with a minority stake held 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 divest the rest of the properties.
Over time, Apollo could sell its stake in the joint venture back to Sony or another buyer. It's not yet clear how big a stake Apollo would have in the company, although the company plans to invest billions in the deal, one person said.
A breakup of Paramount is not the desired outcome for Ms. Redstone, who would prefer to see the company pass intact to another buyer, according to a person familiar with her thinking. But it wouldn't necessarily be a dealbreaker if the offer was compelling, the person said.
There are more candidates. 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 ended last week, shortly after Sony and Apollo expressed their 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 turnaround for Paramount. Unlike Paramount, which streams its content on Paramount Plus, Sony licenses its films and TV shows to companies such as Netflix and Disney. Sony likely wouldn't change that approach to a deal with Paramount and would likely try to combine Paramount Plus with a competing service, such as Comcast's Peacock or Warner Bros. Discoveries Max.
Sony has long pursued Paramount's film studio. Several years ago, executives at Sony contacted Paramount to see if the company would be willing to sell or merge Paramount Pictures into a joint venture, but Paramount rejected this approach, indicating that it was only interested in a deal for the entire company. So when Apollo made a bid for all of Paramount earlier this year, Sony decided to partner.
Any Sony deal would face regulatory hurdles. Regulations prohibit foreign owners from holding licenses for U.S. channels, which could prevent Sony — which is owned by Japan-based Sony Group Corporation — from owning CBS-affiliated TV stations. But they could divest the stations immediately, or let Apollo apply for the permit. Other options for the stations are also being considered.
The deal would also likely require approval from the Committee on Foreign Investment in the United States, the Washington panel that scrutinizes takeovers by foreign owners.
When Sony and Apollo decide to sell off Paramount's 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. TV station groups like Nexstar and Tegna could be logical buyers for the TV stations owned and operated by CBS.
The hardest asset to sell would likely be Paramount's bundle of cable networks like MTV and Nickelodeon, but those could be sold to a TV programmer looking for bigger scale in negotiations with cable companies like Charter and Comcast.