May 6, 2024 - Business

Jeffrey Katzenberg thinks Sony's bid for Paramount has a private equity problem

Jeffrey Katzenberg

Jeffrey Katzenberg at last night's "BFD Talks" event in LA. Photo: Axios

Private equity is trying to help Sony buy Paramount, but Jeffrey Katzenberg believes private equity may be the reason that Sony can't buy Paramount.

Why it matters: Katzenberg isn't just a former Hollywood media mogul and current tech investor. He's also a key advisor to President Biden on his reelection campaign, and one of the Democratic Party's most prolific fundraisers.

Catch up quick: Sony and Apollo have offered to buy Paramount for $26 billion in cash, with Sony to be the majority shareholder. But Sony wouldn't be allowed to hold the FCC license for CBS because it's foreign.

  • Paramount originally was in exclusive talks with Skydance, led by David Ellison, although its exclusivity window expired last Friday.
  • The Skydance bid also is backed by private equity firms — KKR and RedBird Capital Partners — but Skydance itself is U.S.-based.

What Katzenberg said, at an "Axios BFD Talks" event on Sunday night in Los Angeles:

"On the Apollo, Sony side of it ... The FCC is going to allow a private equity firm to take that license? Just think about that. This is the license to operate the No. 1 broadcast network in America, which the FCC has an absolute right to approve. And they're going to say that there's a benefit for that being in the hands of private equity? I don't know. That's a high bar, particularly in the regulatory environment right now."

Katzenberg added that he wouldn't yet count out Skydance, even though its window of exclusivity has closed.

The big picture: Private equity-backed companies have held plenty of broadcast licenses, both for TV and radio, although never for one of the big three national networks.

  • Moreover, Apollo has a secondary FCC (and maybe FTC) issue in that it owns lots of local broadcast affiliate stations via its 2019 deal with Cox Media. That would mean divestitures. And the FTC may object to one big studio, Sony, buying another.
  • Finally, CFIUS also could get involved. Sony seems pretty confident this won't happen because it's from a friendly country and has operated in the U.S. for years, but it might want to sit down with the folks from Nippon Steel about the whole "don't worry, we're from Japan" narrative.

The bottom line: Katzenberg, who began his entertainment career at Paramount, favors Skydance in this battle, saying that he thinks it would be a "great win ... for Paramount and for people in the industry."

  • And that was the same sentiment I got from chatting afterwards with many people in the LA crowd.
  • But they all had the same caveat, which was that control shareholder Shari Redstone may just choose to punt on this entire process and try again in a couple years.
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