Welcome back to Dry Powder. I’m Bill Cohan.

Sure, Apollo’s $11 billion offer for Paramount’s movie studio and TV production studios might be simpler (and smarter) than David Ellison’s bid for the whole shebang, a.k.a. the Redstones’ control of Paramount Global. But it has also left Shari and her board with a difficult Sophie’s Choice situation. In today’s issue, a close look at their options and the next steps in this saga, plus a conversation with Anthony Scaramucci about Trump’s Wall Street panhandling for the $500 million or so he needs to fork over by tomorrow.

Programming Note: This Wednesday, March 27, I’ll join my partners Dylan Byers, Julia Alexander, and the chief executive of Berlin Rosen Holdings, Jonathan Rosen, for the next iteration of Puck’s popular Quarterly Call series, a subscriber-exclusive, earnings-style event in which we will offer professional analysis of the latest convulsions in the media business. Our co-founder and editor-in-chief, Jon Kelly, will moderate the call, which kicks off at 3 p.m. ET / 12 p.m. PT. You can click here to register. I hope to see you there.

Interestingly, CBS and its affiliated local television-station network weren’t part of the offer—although that remains an option. In recent days, I’ve been told that Apollo is flexible about the deal structure, given Paramount’s previous intransigence to part with its studio. Indeed, as you would expect, Apollo is going about this in a very clever way, more clever I would venture than are David Ellison and his SkyDance studio, along with partners RedBird and KKR, who have put together a deal for National Amusements Inc., the Redstone family holding company that controls about 10 percent of the economic ownership of Paramount Global and nearly 80 percent of the voting control. The strategy, presumably, is to get their hands around Paramount Global on the cheap. But the Ellison deal, or the version that has been bandied about in the media now for months, is rife with complications.

First, if Ellison buys NAI, he inherits NAI’s problems, which include some 875 movie theaters around the world that have seen better days and are probably losing money. Ellison would also have to deal with NAI’s $200 million or so in debt plus the $175 million preferred that NAI owes to Byron Trott, Shari’s M&A advisor, and his firm, BDT & MSD Partners. The BDT preferred is also growing by 7.75 percent per year, since it’s a paid-in-kind obligation. And of course, buying NAI requires quite an elaborate negotiation, I’m sure, with Shari about what it’s worth. Based on the Paramount stock these days, Shari’s economic stake is valued at around $770 million. But that won’t cut it because she can also convey to Ellison, through NAI, the voting control of Paramount. How much is that worth? I don’t know, but I suspect Shari is asking at least $2 billion. Will Ellison agree? We’ll see… And then there’s the $11.2 billion in senior debt that would very likely come due upon a change of control. Regardless, one close observer of the dynamic told me what Ellison is trying to cook up would require some serious Delaware corporate legal shenanigans and would be “unprecedented” in terms of trying to resolve the conflicts with a control shareholder.

By making a full offer only for what it really wants—the Paramount studio—Apollo’s bid is simpler and smarter. In 2016, Viacom, one of the two predecessor companies of Paramount Global, briefly floated the idea of selling a 49 percent stake in Paramount Pictures that valued the film and TV studio at around $10 billion. But Shari’s father, Sumner, quickly put the kibosh on that sale, saying he did not want to sell “his baby.” Alas, much has changed in the intervening years. According to the company’s 2023 financial statements, the movie studio had a rough 2023, with revenue of nearly $3 billion—down 20 percent from 2022—and an Adjusted EBITDA loss of $119 million, a nearly $400 million negative swing compared to the year before. That makes Apollo’s $11 billion offer an infinite multiple of the studio’s 2023 operating earnings, as well as a $1 billion premium to the $10 billion price tag that was put on the asset eight years ago. Sounds like Shari should take the money and run.

The other bizarro world factor at play here is that the equity value of Paramount Global is $7.7 billion these days, or $3.3 billion less than the $11 billion Apollo offered for the studio. That’s probably not the right way to look at it, though. The enterprise value of Paramount—the equity value plus its net debt of $14 billion—is $21 billion. So the Apollo offer is about half that. I’m told that MoffettNathanson, the research shop, has written a report to its clients concluding that the Apollo deal for the Paramount studio would be “accretive” to Paramount shareholders—meaning it should be a good deal for them, all things considered, and that the stock would trade up.

Robert Fishman, the MoffettNathanson analyst, wrote in part that the Apollo offer for the studio “helps swing the pendulum in favor of a deal,” adding, “Apollo’s studio offer presents a plus-one bidder for what we would argue is one of the company’s most valuable assets. This could help Paramount secure a higher price for the entire company, if that’s the preferred route, without having to liquidate the company.”

That’s the big unknown of course—and this is not investment advice—and we may never find out the answer if Shari out and out nixes the sale of the studio. There’s no question that Paramount could use the $11 billion in cash, and should use it to pay down its $14 billion of debt. But of course, if Shari does the Apollo deal for the studio, what does she have left to sell? She’d have the declining linear network at CBS, along with its local TV stations, plus the zombie cable channels—check out the ridiculous schedule for MTV—and the seriously unprofitable Paramount+. Ugly stuff, even if Jon Stewart has returned to Comedy Central for one night a week.

In other words, the Paramount board really does face a sort of Sophie’s Choice: Should it sell its most valuable asset for a nice premium and then get stuck with the laborious task of parceling out the rest of the company’s assets piecemeal—precisely the fate that Shari and her old favorite banker, Aryeh Bourkoff, seemed so intent to avoid when they insisted on recombining Viacom and CBS five years ago? Or do they stay the course and stubbornly look for a buyer for all of Paramount—increasingly looking like the null set—and pass on the estate sale obligations to the buyer? Obviously Ellison won’t want what’s left because he wants what Apollo wants. What about David Zaslav and WBD? I suspect Zaz will hang around the hoop to see if he can grab a rebound. He certainly would be happy if Paramount’s net debt were $3 billion, instead of $14 billion. That would be far more palatable to the ratings agencies, the WBD shareholders, and the WBD board than buying the whole enchilada and its $14 billion of net debt and combining it with WBD’s $40 billion of net debt.

I can still envision some sort of partnership between Apollo and WBD to carve up Shari’s birthright, although there would be serious tax consequences, given the low basis of all these assets (although the Paramount tax-basis may be higher since Sumner bought it in 1994 for around $10 billion). And that may be the ultimate dagger for any series of deals that attempts to sell Paramount Global in pieces. It’s one thing to sell off the immaterial Simon & Schuster; it’s another thing, from a tax perspective, to sell CBS or its cable channels. It would also be a sad ending to the saga of the Redstones and Paramount. But it may be the most realistic ending at this point.

If they are rational actors, they would deny him that right. The SPAC is already wildly overvalued considering Truth Social relies solely on Trump’s posts, lost tens of millions of dollars in 2023, and only has a few million dollars in advertising revenue. In short, it’s a meme stock, subject to intense volatility if Trump dumps his shares before the lock-up period. A Trump meme stock without Trump would be pretty worthless, no? But we’re talking Donald Trump here, so it’s quite possible the DWAC board will let him do what he wants, even if that’s not in their economic interest.

But it’s likely that decision won’t come in time to save him by Monday. Would someone lend him the money he needs, taking his DWAC stock as collateral? I could certainly imagine that, although it seems very, very risky to me since Truth Social is a money loser and SPAC stocks are utterly out of favor, especially once they consummate their mergers. Technically, Trump is also forbidden from borrowing against his shares during the lock-up period, although that prohibition too could be waived, I suppose. Could Trump sell some of his DWAC stake to a friend, such as hedge fund billionaire Jeff Yass, who owns 15 percent of ByteDance, the parent company of TikTok and who wants Trump’s support to keep TikTok operating in the U.S.? I could certainly envision that, as unsettling as it would be for the Republican nominee for president to be so compromised. Could the Saudis lend him that money? Anything is possible with Trump, and he’ll spin it to his advantage.

To try to get a sense of the seriousness of Trump’s predicament, I called up Anthony Scaramucci, aka The Mooch, who served as the White House communications director for 11 days during the Trump administration. The Mooch, of course, is very much anti-Trump these days and has said he plans to vote for Biden. He told me that in addition to the 30 bonding companies that Trump approached about providing him the cash he needs by Monday, he said Trump had his “cutouts” calling around Wall Street last week offering potential lenders a 15 percent coupon on a $450 million loan—an extraordinary yield that probably properly reflected the risks involved. The Mooch said Trump’s people approached the direct lending officers at various Wall Street banks as well as the community of distressed debt investors, offering the 15 percent coupon, or interest of nearly $70 million a year. A spokesman for Trump, Steven Cheung, did not respond to a request for comment.

According to the Mooch, there were no takers. “He was rebuffed,” he said. “No one took it.” But, Trump being Trump, later in the day, wrote on Truth Social that he almost has the money he needs. “Someone’s got to become Sherlock Holmes and find out where the money’s coming from,” Scaramucci said. He suggested to me that it could be coming from “offshore,” either money that Trump has squirreled away over the years in foreign banks or from a foreign entity looking to gain a cozy relationship with the ex-president in return for providing him with the money he so desperately needs.

“How much money did he make while he was president?” Scaramucci wondered. “And maybe the answer is zero. But maybe it isn’t. Okay, because knowing his personality, you’d have to assume that it might not be zero, right? And this is the reason why the people in the intelligence community see him as a national security risk. It’s the reason why people were so concerned about the documents being in his possession at Mar-a-Lago. I’m not accusing him of that. I’m just saying, if you know the guy’s personality, you don’t have to be Lieutenant Columbo. Okay? If the windows open, and you hear clippity-clop, there’s usually a horse outside, not a zebra.”

The Mooch said Trump will wait until Sunday night to show his cards, for maximum media impact. If he doesn’t have the money, as he said he did on Truth Social, it’s “really bad” for him, the Mooch said, because his whole identity is wrapped up in being a billionaire and in being “a business mogul.” On the other hand, if he does have the money and forks it over to the court on Monday, it’s legitimate to wonder where it came from. “Because I can tell you right now he exhausted every legitimate place to get the money last week,” The Mooch said. “He went to every Wall Street house looking for the money and they told him no. He went to all these direct lenders in the hedge fund community and they told him no. He went to the bond market and said I will pay a 15 percent coupon and they said no. So where’s he getting the money from?”