U.S., EU lawmakers pledge European scrutiny of Paramount’s WBD deal

A group of US and European lawmakers said: Paramount Skydance CEO David Ellison announces company acquisition offer Warner Bros. discovery He said it would be subject to careful scrutiny by European regulators and that shareholder approval of the deal should not be seen as the final word.

Three members of the European Parliament and two Democratic members of the U.S. House of Representatives issued their warnings in a letter sent Thursday and shared exclusively with CNBC.

“In the European Union, the European Commission and the European Parliament will closely examine market definition, market share threshold, customer substitutability, vertical integration effects and downstream effects on the Internal Market in accordance with the EU Merger Regulation.”

Lawmakers noted that despite a preliminary vote by WBD shareholders approving the merger last month, it was still subject to review by their own government. And they warned that the merger could create new barriers to competition.

“We are particularly concerned about public statements suggesting that this transaction will face minimal regulatory review or likely receive quick approval,” U.S. Reps. Sam Liccardo, D-Calif., and Deborah Ross, D.NC., wrote along with members of the European Parliament Nathalie Loiseau, Brando Benifei and Andreas Schwab.

“Paramount is engaging constructively and proactively with regulators who are rigorously reviewing the transaction,” Paramount said in an emailed statement, noting that the deal “represents increased and greater competition while allowing a well-capitalized, creativity-first company to invest in more projects and deliver stories to audiences around the world. This will expand opportunities for creators and improve consumer choice.”

The warning comes a little more than a week after Paramount’s earnings report, which Ellison said would be a big deal. in a letter It told shareholders that “significant progress” had been made towards completing the acquisition by the end of the third quarter.

“From a strategic perspective, we couldn’t be more excited about the transaction. We’re also on track to complete it by September of this year,” Ellison said during the company’s earnings call.

The merger would bring together powerful movie studios in Paramount and Warner Bros., as well as two popular streaming services, a deep library of franchise content, and a TV network portfolio that includes CBS, TNT, and CNN.

“This transaction, if not fully compliant with the required permitting process and in compliance with all applicable legislation, could significantly reduce competition in interconnected markets, including film and television production, content licensing, theatrical distribution and streaming services,” the lawmakers wrote. “Thus it can reduce consumer choice and increase prices.”

MPs also raised concerns about editorial independence. Shortly after Ellison’s Skydance acquired Paramount last year, the combined company acquired online publication “The Free Press” and appointed co-founder Bari Weiss as editor-in-chief of CBS News.

The long-awaited federal approval for the merger of Paramount and Skydance came shortly after Paramount paid President Donald Trump a $16 million settlement in exchange for his “60 Minutes” interview with then-Vice President Kamala Harris. As part of the lawsuit, Paramount agreed to hire an ombudsman for CBS News.

“[W]We warn about the impact of this merger on media pluralism and call for internal safeguards to ensure that editorial decision-making remains independent from the interests of institutional shareholders, particularly third-country investors,” lawmakers wrote to Ellison.

Paramount agreed to acquire WBD for $31 per share and offered a $7 billion breakup fee if the proposed merger did not receive regulatory approval.

Financing the deal It includes about $24 billion from sovereign wealth funds from Gulf states, in addition to the credit facility and the backing of Ellison’s father, billionaire Oracle co-founder Larry Ellison.

Paramount has previously said Gulf state entities have agreed to give up voting rights in the new company and that the deal is not expected to trigger a mandatory review by the Committee on Foreign Investment in the United States, according to a person familiar with the matter.

If there were an issue regarding foreign investment that would affect overall treaty approval, the Ellison family stopped the deal The person said he would be ready to step in.

Paramount in late April petitioned To the Federal Communications Commission for indirect foreign funding due to its ownership of US broadcast station CBS.

Still, investment sounds alarming.

“Such financing structures raise serious questions regarding national security, editorial independence, foreign government influence, and the potential for scrutiny by the Committee on Foreign Investment in the United States (CFIUS), especially given the concentration of sensitive user data and significant media assets under a single company owner,” the lawmakers wrote in their letter to Ellison. he wrote. “The presence of foreign sovereign wealth funds in the European Union may also raise questions regarding the application of the Foreign Subsidies Directive.”

They have promised that the merger will go through a rigorous review process, despite recent comments from some regulators, including U.S. Federal Communications Commission Chairman Brendan Carr, who said he expected the deal to be approved “fairly quickly.” It’s worth noting that the FCC won’t have sole approval over the deal.

“Public trust requires a rigorous and transparent review process. Please consider this letter as formal notification that any suggestion that the transaction effectively eliminates regulatory hurdles is false,” the lawmakers wrote.