Paramount Skydance Corp’s US$110 billion (S$142 billion) takeover of Warner Bros Discovery Inc won conditional approval from the European Union, a positive development for the deal even as it faces a high-stakes US lawsuit that threatens its progress.
The European Commission said on July 22 that the deal no longer causes competition concerns after Paramount agreed to end a longstanding distribution agreement with Universal Pictures in Europe. As part of the EU commitments, Paramount has 13 months from the date of the closing of the deal to pull out from the Universal accord.
“These commitments fully address the competition concerns identified by the commission by ensuring that the films of the merged entity will not be distributed jointly with those of Universal or Disney,” EU competition regulators said in a statement.
Paramount inked the deal in February after beating back Netflix Inc in a heated bidding war. Scrutiny from the EU’s antitrust arm should have been one of the last major obstacles that Paramount’s Chief Executive Officer David Ellison needed to overcome after the US also cleared the deal.
“Today’s approval from the European Commission marks another significant milestone in bringing Paramount and Warner Bros. Discovery together,” Paramount’s Chief Legal Officer Makan Delrahim said in a statement. “Not only does this combination not pose any competitive harms, it actually enhances competition by creating a scaled media and entertainment company with the ability to truly challenge the tech platforms that have come to dominate the industry.”
However, on July 13 California and 11 other states sued to block the Hollywood mega-merger arguing that the deal, which seeks to combine two of the five largest studios, would harm competition for film and cable TV distribution.
The federal judge overseeing that case then temporarily paused the deal for 14 days, scuppering Paramount and Warner Bros hopes of closing it as soon as this week. If the tie-up doesn’t close by the end of September, Paramount must pay late fees to Warner Bros’ shareholders of about US$7 million per day.
Warner Bros shares have slumped since the July 20 ruling, leaving the gap between the stock’s price and Paramount’s US$31-a-share offer near the widest level since the takeover was announced in February.
The next hearing in the suit is scheduled for early August to determine whether the acquisition should be put on ice pending the outcome of a full trial.
In Britain meanwhile, the deal faces the prospect of a public interest intervention from the British government after the country’s culture and media secretary raised concerns over the diversity of media ownership. BLOOMBERG
