Marc Rowan, the CEO of Apollo Global Management, is not overly concerned about potential regulatory problems in the private equity firm's joint $26 billion all-cash offer to buy Paramount Global with Sony Pictures Entertainment.
Sony Pictures Entertainment is fully owned by the Japanese conglomerate Sony Group Corporation. Also, Apollo has a small share in Cox Media Group, which controls 12 local U.S. TV stations in nine metro areas.
The Federal Communications Commission has a 25% investment limit for foreign ownership in a U.S.-based entity with direct or indirect control of a U.S. broadcast, common carrier, or aeronautical radio station licensee. The FCC can allow owning more than 25% and up to 100% of a U.S.-based entity that has a controlling interest in a common carrier or aeronautical radio licensee, unless it's against the public interest. As for national television ownership, the FCC allows a single entity to own as many TV stations nationwide as long as the stations together reach no more than 39% of all U.S. TV households.
Regarding regulatory concerns, the executive stated, “Look, regulatory is an issue for every transaction, but these paths are well trodden.” He explained that Sony already owns a studio, and Apollo already owns TV stations, and the legal limits are clear. Asked about Apollo’s role in the bid for Paramount, Rowan mentioned that the firm always aims for “value creation” and improving things.Rowan commented on the changing media industry and the potential for two studios to come together in light of new competition from streamers like Meta and Apple, saying that the market is wide open. He also emphasized the benefits of having scale and resources for content production efficiently.
Rowan acknowledged that Apollo is typically involved in financing but argued that the firm has 35 years of experience in the media industry.
As per the bid terms, Sony would be the main shareholder of Paramount with operational control, while Apollo would hold a smaller stake. An individual familiar with the matter highlighted that the bid's expression of interest is non-binding, and the $26 billion price, including debt assumption, is just a starting point.
“We care about the price we pay,” Rowan explained. “Our goal is to give our investors more return for the amount of risk. We only do things that give a return to our investors.”
Sony and Apollo joined together to make an offer after Paramount's special committee allowed its exclusive discussions with Skydance Media to end without reaching a deal.
While the committee wants to keep talking to Skydance, opening up talks to other potential buyers gives companies that were waiting a chance to make a competing offer.
There's a possibility that Paramount might not accept any offers and decide to continue on its own with the new management team after CEO Bob Bakish resigned. The Office of the CEO at Paramount, which includes CBS CEO George Cheeks, Paramount Media Networks CEO Chris McCarthy, and Paramount Pictures and Nickelodeon CEO Brian Robbins, is working on a long-term plan for the company.
Paramount, with a market value of $9.2 billion, has seen its shares drop by 22% in the past year and 8% so far this year. However, the stock has increased by 19% in the last month and 4% in the last six months.
The private equity firm and Sony Pictures Entertainment have made a joint, nonbinding $26 billion all-cash offer.
While the committee has pushed for further talks with Skydance, the decision to open talks to other bidders gives companies who may have been sitting on the sidelines a chance to make a competing offer.
There’s also a scenario in which Paramount could not accept any bids and choose to go it alone under its new management structure following the resignation of CEO Bob Bakish. Paramount’s Office of the CEO, comprised of CBS CEO and president George Cheeks, Paramount Media Networks CEO and president Chris McCarthy and Paramount Pictures and Nickelodeon CEO and president Brian Robbins, is in the process of putting together a long-term strategic plan for the company.
Paramount, whose market capitalization currently sits at $9.2 billion has seen its shares fall 22% in the past year and 8% year to date. However, the stock is up 19% in the past month and 4% in the past six months.
