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Sony Group Corp’s (NYSE:SONY) shares experienced a significant drop, the largest in nearly three months, following its joint $26 billion bid with Apollo Global Management Inc (NYSE:APO) to purchase American multinational mass media and entertainment conglomerate Paramount Global (NASDAQ:PARA).
The offer has sparked concerns about Sony’s financial capacity to handle the acquisition, as the proposed deal exceeds Sony’s current cash reserves.
Despite the concerns, market analysts suggest that more apparent financing plans could shift focus to the deal’s potential benefits, Bloomberg reports.
Sony, which has about ¥1.5 trillion ($9.7 billion) in cash and equivalents, is contemplating a majority stake in the venture, with Apollo participating as an investor. However, the transaction involves a substantial premium over Paramount’s existing market value and debt, leading some analysts to question the strategic fit of the acquisition.
Additionally, the deal might attract regulatory scrutiny, especially concerning the CBS channel included in the acquisition, which foreign entities cannot own.
Meanwhile, prior reports indicated Paramount Global and Skydance Media were nearing a merger, valuing Skydance at $5 billion. Paramount’s merger plans shocked analysts who consider the deal positioned to mark the end of Shari Redstone‘s control over the media conglomerate.
Meanwhile, Sony is also focusing on upgrading the Bravia television line to tap the streaming enthusiasts. Streaming titans Netflix Inc (NASDAQ:NFLX) and Walt Disney Co (NYSE:DIS) Disney+ are churning out more content across the U.S., Canada, the U.K., Mexico, and Germany to tap the rising streaming viewership.
Sony held ¥2.02 trillion in cash and equivalents as of its fiscal second quarter.
PARA stock lost 22% in the last 12 months. SONY gained 3%.
Investors can gain exposure to SONY via WBI BullBear Quality 3000 ETF (NYSE:WBIL) and BlackRock Large Cap Core ETF (NASDAQ:BLCR).
Price Action: SONY shares closed higher by 0.35% at $84.84 on Monday. PARA shares closed higher by 3.10% at $13.29.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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