DOJ greenlights Paramount-WBD merger, but European hurdles remain
DOJ greenlights Paramount-WBD merger, but European hurdles remain
The United Kingdom and European Union are both actively investigating the merger to see if it complies with all applicable laws.
UPDATE: The Department of Justice has officially approved Paramount Skydance’s $110 billion acquisition of Warner Bros. Discovery. After a review of the deal, the DOJ opted against requiring Paramount to submit to any significant concessions to receive regulatory approval, meaning that the transaction will move forward essentially as initially presented, at least on the federal level.
“This deal is pro-competitive, resulting in a stronger company better positioned to compete against dominant technology platforms in an industry increasingly defined by intense competition for audiences, talent, technology, and investment,” a Paramount spokesperson told Deadline. “We remain focused on completing the transaction as soon as possible and delivering its benefits to consumers, creators, and the entertainment industry as a whole.”
While the deal has been approved by the DOJ, there are still regulatory hurdles Paramount must clear before the deal is officially finalized. In a social media post, California Attorney General Rob Bonta said, “The merger of Warner Bros. and Paramount is not a done deal and remains under investigation by my office.”
Last week, Paramount received regulatory approval in Australia for the deal to proceed. However, the deal is still being investigated in the United Kingdom and by the European Commission. The U.K.’s Competition and Markets Authority opened a merger inquiry designed to determine if the acquisition would present a “realistic prospect of a substantial lessening of competition.”
The European Commission, the EU’s politically independent executive arm, is currently examining the merger under its Foreign Subsidies Regulations, thanks in part to the $24 billion from Gulf State wealth funds that Paramount is utilizing to complete the purchase.
Paramount has consistently said its plan is to finalize the acquisition by the end of September. If it fails to do so, it will pay WBD shareholders a “ticking fee” of several million dollars each day that the process drags on. On the domestic front, the deal is ready to move forward, but given the pace at which European governments operate during the summer, that deadline could still be in jeopardy.
The merger of Paramount and Warner Bros. Discovery faces several key challenges, including a class-action lawsuit, the threat of regulatory review by the state of California, and a long look-over by European regulators. But interference from the Department of Justice now appears highly unlikely, as a new report indicates that Paramount has likely swayed DOJ representatives with its arguments toward approving the deal.
Key Details:
- Go ahead: The DOJ appears poised to approve the Paramount/WBD merger.
- Cinematic concern: Talks between the DOJ and Paramount centered on a reduced output of theatrical releases.
- Other challenges: The merger still faces other regulatory barriers before it can be completed.
A report from Semafor indicates that Paramount officials met with DOJ representatives this week. Citing people familiar with the talks, the report indicates that DOJ staff attorneys seem convinced by arguments from Paramount executives that the deal would not harm other major Hollywood studios.
As Paramount CEO David Ellison and his billionaire father Larry are strong political allies of President Donald Trump, many analysts assumed the merger would be given a smoother pathway to regulatory approval. But as Semafor notes, the DOJ attorneys who are involved with Paramount are nonpolitical employees and have privately broken with Trump’s DOJ leadership over merger approvals in recent months. And yet, they still seem inclined to greenlight the Paramount-WBD combination.
Discussions cover a number of potentially problematic topics, including the possibility of reduced theatrical output once the two studios combine. Ellison has assured cinema chains more than once of his commitment to continue releasing a certain number of movies every year, and to maintain a minimum time interval of 45 days for theatrical releases before moving them to streaming.
Talks between Paramount and the DOJ are still ongoing, and the company faces other difficulties in getting the deal across the finish line. European regulators still have to weigh in, and California attorney general Rob Bonta has said the merger has “red flags everywhere.” Paramount streaming subscribers have also launched a class action lawsuit to try to stop the combination of the two companies.
Paramount has maintained a veneer of confidence through it all and has worked a “ticking fee” into its merger agreement with WBD. If the deal isn’t closed by Sept. 30, that fee will begin tolling as a way to compensate WBD shareholders. But at least as far as the DOJ goes, Paramount has every reason to think it will win regulatory approval before that deadline.
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