(Reuters) -Paramount Global will end exclusive negotiations with Skydance Media without a deal, according to a person familiar with the discussions, allowing it to evaluate a rival bid for the home of "Mission: Impossible" and "SpongeBob SquarePants".

Shares of Paramount rose 3% in extended trading.

A special committee of the Paramount board, created to evaluate offers for the company, has been holding exclusive deal talks with Skydance Media. That period of exclusivity was due to end at midnight eastern U.S. time on Friday (0400 GMT Saturday).

An eleventh-hour overture from Sony Pictures Entertainment and private equity firm Apollo Global Management expressing interest in acquiring Paramount Global complicated negotiations, another person familiar with the talks told Reuters.

The companies submitted a non-binding offer letter on Wednesday, signed by Sony Pictures Chief Executive Tony Vinciquerra and Apollo partner Aaron Sobel, a source confirmed to Reuters. The $26 billion offer is a combination of cash and assumption of debt.

That may have forced the special committee's hand, especially after some shareholders raised concerns about the deal with David Ellison's Skydance and have urged Paramount to consider other offers, including the one from Apollo.

A source close to the Redstone family said Shari Redstone, who controls the Paramount media empire, would support the special committee's consideration of a possible Sony-Apollo transaction or any deal that would benefit shareholders.

Paramount's special committee is set to meet on Saturday to discuss the deal, the New York Times reported, citing two people with knowledge of the company's plans.

A spokesman for the special committee declined comment.

Apollo also declined comment to Reuters, which reported in April that Sony Pictures and Apollo were in talks about a joint bid. Paramount and Sony also declined comment on this week's Apollo-Sony offer, which was first reported by the Wall Street Journal.

The competing offer comes at a tumultuous time for Paramount.

Shari Redstone's media empire replaced Paramount CEO Bob Bakish with a trio of executives on Monday, while four independent members of the board are set to step down at the company's annual shareholder meeting on June 4.

Bakish was once viewed as Redstone's loyal lieutenant.

However, their relationship began to sour in May 2023, when he urged Redstone to support a cut to the company's share dividend, saying it would lift Paramount's sagging stock, a prediction that never came true, according to two sources close to Redstone.

PARAMOUNT'S STRUGGLES

Paramount, like other studios, has been struggling to recover from last year's months-long strikes by Hollywood writers and actors, a soft advertising market and falling cable subscriptions in the United States that has eroded profit for its TV business.

Its streaming service, Paramount+, also trails rivals such as Netflix and Disney+ in subscriber numbers - even though Redstone had hoped the merger of CBS and Viacom in 2019 would help the combined company, later renamed Paramount Global, compete better.

Shares of Paramount have fallen more than 65% since then, losing more than $14 billion in market value.

After its shares dropped 7% in Friday's trading session, Paramount had a stock market value of about $9 billion, according to LSEG data. The media company carries more than $14 billion of debt.

The potential acquisition would help Sony Pictures grow its share of the North American box office. The studio reaped about $1 billion in U.S. and Canada box office revenue last year, compared with Paramount's $842.4 million, according to data from Comscore.

Sony Pictures, a unit of Tokyo-based Sony Group, says its operations span movie and television production, acquisition and distribution, digital content creation and distribution, studio facility operation and the development of new entertainment products, services and technologies.

The group has more than 3,500 movie titles and notable franchises such as "Jumanji", "Resident Evil" and "James Bond." Combining Sony and Paramount, whose movie library spans "Star Trek", "Top Gun" and "The Godfather," would create a formidable Hollywood studio.

This is not the first time Sony has pursued Paramount. Vinciquerra had previously approached Paramount's controlling shareholder, Shari Redstone, to explore acquiring the Paramount Pictures film studio, according to two people familiar with the matter. At the time, Redstone was uninterested in breaking up the company, according to one of the sources.

The expression of interest marks the beginning of a process that would involve due diligence. There also are potential regulatory obstacles to Sony Pictures, a Japanese-owned business, controlling Paramount's CBS broadcast network.

A person familiar with the deal said they hope to mitigate concerns about foreign ownership of a U.S. broadcaster through its partnership with U.S.-based Apollo. The private equity firm acquired Cox Media Group's television stations in a 2019 deal that required approval of the Federal Communications Commission.

Sony would hold a majority stake in the venture, a source previously told Reuters, and operate Paramount, with Apollo as a minority shareholder.

(Reporting by Dawn Chmielewski in Los Angeles, Surbhi Misra and Harshita Mary Varghese in Bengaluru; Editing by Alexander Smith, Kirsten Donovan, Nick Zieminski and Anil D'Silva)