Apollo Global Management and Sony’s joint bid to acquire Paramount Global is facing substantial obstacles in gaining approval from Democratic-led federal regulators due to antitrust concerns, sources familiar with the matter have revealed.
Paramount, which recently terminated exclusive merger discussions with Skydance Media, boasts ownership of the CBS network, its Hollywood studio, and 28 local stations, including 17 CBS affiliates in major markets like New York, Chicago, and Los Angeles.
Apollo and Sony’s $26 billion all-cash offer for the media conglomerate encounters resistance in navigating the FCC’s 39% cap on the reach by local affiliates, should the merger be sanctioned by Paramount’s board. Apollo’s ownership of TV channels covering 11% of US households through its stake in cable company Cox Media Group exacerbates this challenge.
The proposed workaround by Apollo hinges on leveraging an FCC loophole called the “UHF Discount,” which halves the percentage of households counted by stations broadcasting in the UHF bandwidth. However, there’s speculation that the FCC may abolish this discount, as FCC Chair Jessica Rosenworcel views it as outdated.
The FCC’s stance on private equity-backed media ownership presents another hurdle. Hollywood mogul Jeffrey Katzenberg expressed skepticism over the FCC’s inclination to permit a private equity firm to control a major broadcast network, highlighting Apollo’s previous difficulties in gaining FCC approval for mergers.
Moreover, the bid could face scrutiny from the Committee on Foreign Investment in the US (CFIUS) over Sony’s Japanese ownership of CBS. Concerns also arise regarding potential antitrust implications of Sony, already owning a film division, acquiring another movie studio.
The regulatory environment and FCC’s approach to media ownership could significantly delay or impede approval of Apollo and Sony’s bid, with indications suggesting a rigorous evaluation process ahead.
