Paramount-WBD Merger Cleared
FCC approves foreign investment for the proposed Paramount and Warner Bros. Discovery merger.
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Key Points
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The transaction had already been cleared by Warner Bros. Discovery shareholders and regulators in 68 jurisdictions, including the U.S. Department of Justice, the European Commission and the U.K. Competition and Markets Authority.
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The FCC’s jurisdiction arose in part because Paramount owns CBS stations and foreign owners are restricted from holding U.S. broadcast licenses.
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Paramount said the combined company would provide the scale to compete with major technology companies, arguing it could “compete, invest, innovate, and deliver premium content to audiences worldwide.”
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The proposed acquisition is valued at $110 billion, including debt, with $24 billion in equity funding from the three Middle Eastern sovereign wealth funds.
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Paramount agreed to delay the merger’s closing until at least five days after the outcome of litigation brought by a group of 12 parties.
The Federal Communications Commission approved foreign investment exceeding 25% in Paramount's $110 billion acquisition of Warner Bros. Discovery, clearing a major regulatory hurdle for the merger. ArcaMax reports that sovereign wealth funds from Saudi Arabia, Qatar, and Abu Dhabi will collectively account for about 38.5% of the combined company, with the investments primarily involving nonvoting shares.
The Ellison family and RedBird Capital will retain all voting rights and control of the merged company. CNBC TV18 notes the FCC's approval follows a national security review that recommended acceptance with data-protection and access restrictions, though some Democratic lawmakers have raised concerns about foreign involvement.
Why the FCC Had to Approve the Deal
Paramount owns CBS stations, which are broadcast licenses. U.S. law restricts foreign owners from holding broadcast licenses. Since the merger would create a company with significant foreign investment, the FCC needed to review and approve the arrangement before the deal could close.
Middle Eastern Funding Fuels $24 Billion Investment
Three sovereign wealth funds from the Middle East are investing $24 billion in equity. GuruFocus states that Saudi Arabia, Qatar, and Abu Dhabi will collectively hold about 38.5% of the combined company and 49.5% of total foreign ownership. The FCC also approved each investor to hold up to 20% of Paramount's indirect equity individually.
Global Regulators Already Signed Off on the Merger
The FCC approval is the final major hurdle. Warner Bros. Discovery shareholders and regulators in 68 jurisdictions have already cleared the deal, including the U.S. Department of Justice, the European Commission, and the U.K. Competition and Markets Authority. Paramount argued the combined company would have "the scale to compete with major technology companies."
Closing Delayed by Pending Legal Challenges
Paramount agreed to delay the merger's closing until at least five days after the outcome of litigation brought by 12 parties. While the FCC has approved the foreign investment structure, the deal still faces legal opposition from various stakeholders challenging the merger's terms.
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