Paramount Global has entered formal negotiations with a bidding group led by Sony Pictures Entertainment and Apollo Global Management after exclusive talks with Skydance lapsed on Friday night, according to reports.

A special committee of Paramount's board of directors met over the weekend and approved deal talks with Sony and Apollo, who submitted a nonbinding letter of interest, the New York Times reported. 

Paramount Seeks Strategic Shift

Sony and Apollo recently offered $26 billion in cash to acquire Paramount, Forbes reported.

Skydance had a tentative deal to buy Shari Redstone's controlling stake in Paramount but couldn't finalize it before talks ended last Friday. This failure allowed Paramount to start considering alternative options.

This development comes as Paramount faces challenges in its traditional business models, such as the decline of cable TV and profitability issues with its streaming services.

READ NEXT: Sony, Apollo Bid $26 Billion in Cash for Paramount Global

Regulatory Challenges for Sony-Paramount Deal

One significant hurdle facing the Sony-Apollo bid is regulatory restrictions on foreign ownership of broadcast networks. 

Regulations might make it difficult for Sony's Japanese parent company to directly own CBS, a crucial part of Paramount's portfolio. 

The bidding group may propose solutions like having Apollo, a US-based entity, take control of CBS's broadcast license, according to the New York Times.

Moreover, Paramount's controlling shareholder, Shari Redstone, reportedly prefers Skydance's bid due to anticipated lower regulatory hurdles. 

However, investors and industry analysts are closely watching developments, with growing expectations that neither bid may ultimately succeed due to regulatory and legal complexities.

Sony executives, meanwhile, have discussed integrating Paramount Studios into their existing empire, which includes popular franchises like Spiderman. Such consolidation could lead to synergies in theatrical marketing and distribution operations.

READ MORE: Paramount-Skydance Merger Might Not Happen as Shari Redstone-Controlled Entertainment Firm Allegedly Backs Away