(June 10): Paramount Skydance Corp’s US$110 billion takeover of Warner Bros Discovery Inc is being reviewed under the European Union’s Foreign Subsidies Regulation (FSR), with regulators probing involvement of Middle Eastern funds helping to bankroll the takeover.
The EU said on Wednesday it set an initial July 14 deadline for vetting the deal under the law, which adds to an ongoing investigation under the bloc’s standard merger rules with a deadline a week earlier.
Scrutiny from the 27-nation EU is one of the last hurdles Paramount chief executive officer David Ellison must overcome after outmanoeuvring rival suitor Netflix Inc with multiple bids over more than five months.
The deal unites two Hollywood studios behind legendary films from Casablanca and Harry Potter to Mission: Impossible; two major news networks in CNN and CBS; the streaming powerhouse HBO and dozens of cable networks.
A trio of Middle East funds agreed to provide about US$24 billion of equity finance to help bankroll Paramount’s bid. This includes Saudi Arabia’s Public Investment Fund (PIF), the Qatar Investment Authority, and the lesser-known Abu Dhabi firm L’Imad Holding Co.
The funds are overseen by wealthy Gulf states that have long supplied large amounts of capital to global buyout firms. One example is Apollo Global Management Inc, which is among firms providing multi-billion dollar financing for the Paramount offer. Abu Dhabi’s Mubadala Investment Co has a long-standing relationship with Apollo, and the PIF’s venture arm has invested in funds run by the US firm.
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The EU’s FSR is aimed at preventing firms bankrolled by sovereign states — such as petrol-rich Gulf nations and China — from distorting fair competition in the bloc. Should regulators find problems, they could eventually open a full-scale probe, with Paramount potentially having to issue remedies to offset any concerns.
Paramount declined to comment on the specifics of the FSR case, adding that it has “been engaged with all regulatory and law enforcement bodies in a constructive and transparent manner and will continue to do so.”
A spokesperson for the European Commission, the EU’s competition authority, declined to comment.
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In late May, e-commerce firm JD.com Inc’s offer to acquire Germany’s Ceconomy AG became the first Chinese-led deal to garner full-scale scrutiny from Brussels under the FSR, following an earlier in-depth probe into Abu Dhabi National Oil Co’s €11.7 billion takeover of Covestro AG — a deal that was ultimately cleared by regulators with commitments.
Uploaded by Evelyn Chan
