(Bloomberg) — Shares of Sony Group Corp. fell the most in nearly three months after its proposed purchase of Paramount Global raised financial concerns.
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Shares fell as much as 4.2% in Tokyo. The Japanese electronics company and Apollo Global Management Inc. have made a $26 billion proposal to buy Paramount, which is evaluating the offer, people with knowledge of the matter said.
“Although it is a joint offering, investors are concerned about Sony’s finances” given that the size of the deal is larger than Sony’s cash, said Yugo Tsuboi, chief strategist at Daiwa Securities. Once there is more clarity about how the deal will be financed, investors will start looking at the benefits, he said.
Sony holds about 1.5 trillion yen ($9.7 billion) in cash and cash equivalents, according to data compiled by Bloomberg. The Tokyo-based company is considering acquiring a majority stake in the new venture, with Apollo as an investor, the people said.
The deal represents a hefty premium for Paramount, based on the company’s $9 billion market capitalization and $12 billion net debt, Macquarie Capital’s Damian Thong said in a note to investors. “We don’t think buying Paramount makes sense.”
Sony shares have fallen more than 5% this year, compared with a 16% gain in the Topix index, amid a global crisis in the electronics sector. The company in February reduced its projections for sales of the PlayStation 5 game console.
Sony’s deal with Paramount would attract additional regulatory scrutiny
“In addition to the impact of the acquisition on its cash and debt position, questions have arisen regarding the CBS channel that comes with Paramount, which foreigners cannot own, and given the political climate, it appears that the deal will face a great deal of scrutiny,” said Amir Anvarzadeh, a Singapore-based strategist at Asymmetric Advisors. “Unless they find a buyer for CBS, the deal is unlikely to go through.”
(Adds Macquarie comment in fifth paragraph)
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