EU to probe PSKY-WBD’s Gulf state funding as other countries approve deal

Paramount’s studio lot

The European Union (EU) has said it will probe the involvement of Middle Eastern money in Paramount Skydance (PSKY)’s US$110bn acquisition of Warner Bros Discovery (WBD), while several other countries including Australia have cleared the deal in their own reviews.

David Ellison

Three Arab sovereign wealth funds – Saudi Arabia’s Public Investment Fund (PIF), Abu Dhabi-based L’imad Holding and the Qatar Investment Authority (QIA) – are jointly contributing around US$24bn in the transaction, although PSKY has said they will not have voting rights or board representation in the merged entity.

In a notice posted on its website on Wednesday, the European Commission (EC), an independent arm of the EU whose responsibilities include enforcing European law, set July 14 as the deadline for completion of the investigation.

The EC is also undertaking a separate probe of the merger on antitrust grounds, with a July 7 deadline set for a ruling on whether it will approve, approve with remedies or open a more in-depth investigation.

In April, David Ellison-led PSKY disclosed in a regulatory filing that the merged company would be 49.5% owned by foreign investors, with 38.5% of that from the three Middle Eastern wealth funds. Within that, the PIF would own a 15.1% stake, with L’imad Holding on 12.8% and QIA on 10.6%.

Elsewhere, PSKY on Wednesday said the WBD merger had been approved by regulators in several countries including Australia, New Zealand, Saudi Arabia, Serbia and Ukraine.

The Australian Competition & Consumer Commission said it had found the WBD/PSKY combination was “unlikely to have the effect of substantially lessening competition in relation to the wholesale supply of films for theatrical release in Australia” in a notice issued Wednesday.

These latest developments come amid a busy week for the controversial mega merger, which will bring under the same roof assets including broadcaster CBS, CBS News, Paramount+, Paramount TV Studios, Paramount Pictures and Nickelodeon with Warner Bros Motion Picture Group, HBO, HBO Max, CNN, Discovery Channel and Cartoon Network, as well as the enormous content libraries of both studios.

Last week, it emerged that several US states including California and New York were preparing to file a lawsuit blocking the deal on antitrust grounds. And earlier this week, UK antitrust watchdog the Competition & Markets Authority said it would conduct its own probe.

For the most part, legal experts believe the deal will likely survive all of the various legal and regulatory hurdles. However, some of the investigations could potentially call Paramount’s hoped-for deadline for the deal’s completion, September 30, into question.

As part of the agreement with WBD, PSKY agreed to pay an additional 25 cent “ticking fee” for every quarter if the deal has not closed by September 30, equating to around US$7m per day.

This week, PSKY claimed that Netflix is attempting to meddle in its efforts by trying to “poison” regulators against the deal. Netflix responded by calling the accusation “absurd.”