EU opens foreign subsidies probe into Paramount’s Warner Bros. bid

The European Commission set a July 14 deadline to assess whether Middle Eastern government-linked financing in the Paramount ↘0.40%–Warner Bros. Discovery ↘0.15% deal distorts EU competition.mlex
Three Gulf sovereign wealth funds, led by Saudi Arabia’s Public Investment Fund, committed roughly $24 billion in equity to help bankroll the acquisition, according to the Wall Street Journal.wsj
The probe runs alongside a separate EU antitrust review due July 7 and a newly opened UK CMA inquiry, complicating Paramount’s goal of closing by late summer.deadline

EU Probes Middle East Funding in Paramount’s $110 Billion Warner Bid

The European Union opened a review on Wednesday of roughly $24 billion in Gulf sovereign wealth fund financing backing Paramount Skydance Corp.’s $110 billion takeover of Warner Bros. Discovery, adding a new layer of regulatory scrutiny to a deal already under a separate antitrust investigation.

The European Commission set an initial deadline of July 14 for its assessment under the bloc’s Foreign Subsidies Regulation, according to an update on the Commission’s case register. The review runs in parallel with a standard merger probe already underway, which carries a provisional Phase 1 decision deadline of July 7.mlex

What the Foreign Subsidies Review Means

The EU’s Foreign Subsidies Regulation, which took effect in 2023, requires notification when an acquiring party has received more than €50 million in financial contributions from non-EU governments. Three Gulf sovereign wealth funds — Saudi Arabia’s Public Investment Fund, the Qatar Investment Authority, and Abu Dhabi’s L’imad Holding — agreed to provide the equity financing to help bankroll Paramount’s bid. The Wall Street Journal first reported that Saudi Arabia’s PIF committed roughly $10 billion, with the Qatari and Abu Dhabi funds each contributing smaller amounts.nytimes

Under the regulation, the Commission will examine whether the foreign financial contributions could distort competition in the EU’s internal market. If regulators identify concerns, they could escalate to a full-scale investigation and demand remedies from Paramount.wolterskluwer

A Growing Regulatory Gauntlet

The foreign subsidies review compounds an already busy regulatory calendar for the deal. The UK’s Competition and Markets Authority announced on Tuesday that it had opened its own Phase 1 merger inquiry, with a deadline of August 7. U.S. and EU lawmakers have also warned the deal will face close examination in Europe.deadline

Paramount has signaled it is prepared to divest children’s TV network assets if the EU raises competition concerns over market overlaps, according to Bloomberg. The combined company’s market share in Europe remains below 20 percent across all segments, which initially led observers to expect a smooth approval process when the deal was signed in February.wmbdradio

Path to Closing

Warner Bros. Discovery shareholders overwhelmingly approved the merger in April. Paramount has targeted a close as early as the end of July, though the mounting regulatory timelines could push completion deeper into the third quarter. If the deal fails to close by September 30, Paramount owes WBD shareholders a ticking fee of 25 cents per share each quarter, and a $7 billion termination fee if the merger collapses entirely.reuters