Sony Group Corp.’s shares took a hit as investors expressed concerns over the financing of its proposed $26 billion acquisition of Paramount Global. The stock dropped by as much as 4.2% in Tokyo, marking the largest decline in almost three months for the Japanese electronics company.
The joint offer made by Sony and Apollo Global Management Inc. to acquire Paramount has raised questions about Sony’s financial capabilities, as the deal size exceeds Sony’s cash holdings of ¥1.5 trillion ($9.7 billion). Investors are eagerly awaiting more details on how the deal will be financed before assessing the potential benefits.
Macquarie Capital’s Damian Thong expressed skepticism about the deal, noting that the proposed acquisition represents a significant premium for Paramount, which has a market capitalization of $9 billion and net debt of $12 billion. Thong stated, “We do not think buying Paramount makes sense.”
Furthermore, concerns have been raised about the regulatory hurdles the deal may face, particularly regarding the ownership of the CBS channel that comes with Paramount. Foreign ownership restrictions and the current political climate could pose challenges for the acquisition to proceed smoothly.
Sony’s shares have already declined by more than 5% this year, in contrast to the 16% gain in the Topix index. The company’s decision to lower sales projections for the PlayStation 5 gaming console earlier this year has also contributed to the negative sentiment surrounding the stock.
As the situation unfolds, investors will be closely monitoring any developments related to the proposed acquisition of Paramount and its potential impact on Sony’s financial position and regulatory approval.