Sony Group Corp.’s shares slid the most almost three months after its proposal to buy Paramount Global raised financing concerns. The stock dropped as much as 4.2% in Tokyo.
The Japanese electronics company and Apollo Global Management Inc. made a US$26 billion proposal to buy Paramount, which is weighing the offer, people with knowledge of the matter have said.
Yugo Tsuboi, chief strategist at Daiwa Securities, said, “While it’s a joint offer, investors are worried about Sony’s finances,” given that the deal size is larger than Sony’s cash holdings.
He said that investors will begin to consider the benefits once Sony reveals more clarity on how the deal will be financed.
Macquarie Capital’s Damian Thong said in a note to investors that the deal represents a hefty premium for Paramount, based on the company’s US$9 billion market capitalization and US$12 billion net debt.
“We do not think buying Paramount makes sense.”
Sony’s shares have dropped more than 5% this year, compared with a 16% gain in the Topix index, amid a global electronics slump.
In February, the company cut its projections for sales of the PlayStation 5 gaming console.
“Besides the impact of the acquisition on its cash position and debt, questions have risen regarding the CBS channel that comes with Paramount, which foreigners can’t own, and given the political climate, it seems that the deal will face major 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.”
