EU probe into Gulf state funding complicates Paramount Skydance-WBD merger
The European Union plans to investigate Middle Eastern funding in Paramount Skydance (PSKY)'s US$110bn acquisition of Warner Bros Discovery (WBD), despite other countries already approving the deal. This regulatory scrutiny by the European Commission adds another layer of complexity to the contentious merger, alongside ongoing antitrust probes in the EU, UK, and US states.
Key Takeaways
- Saudi Arabia's Public Investment Fund, L’imad Holding, and Qatar Investment Authority are jointly providing $24 billion in transaction funding.
- The European Commission set a July 14 deadline for its foreign subsidy probe and July 7 for its separate antitrust ruling.
- Foreign investors are slated to own 49.5% of the merged entity, including a 15.1% stake held by the PIF.
- Paramount Skydance faces a daily 'ticking fee' of approximately $7 million if the merger does not close by September 30.
- Regulators in Australia, New Zealand, Saudi Arabia, and Ukraine have already approved the transaction.
Why It Matters
The EU’s dual investigations introduce significant regulatory friction that could jeopardize the target closing date of September 30. If delayed, Paramount Skydance must pay a quarterly ticking fee of $0.25 per share, creating immediate financial pressure to resolve European concerns. Globally, this probe signals how the EU’s new Foreign Subsidies Regulation will be used to monitor the influence of non-Western capital in major media consolidations. Success or failure here will define the feasibility of using sovereign wealth to fund massive industry realignments. Watch for the July 7 antitrust ruling as the first indicator of whether the EC will demand asset divestitures, such as kids' networks, to allow the deal to proceed.
Additional Context
The European Commission's investigation is being conducted under the Foreign Subsidies Regulation (FSR), a framework that became applicable in July 2023. Per the European Commission (June 2026), the FSR was established to prevent non-EU state subsidies from distorting the internal market, particularly during large-scale acquisitions. This marks one of the first major applications of the rule within the media sector, reflecting broader European concerns regarding 'rogue media service providers' and foreign interference in critical infrastructure, as noted in previous regulatory filings and academic reviews by imec-SMIT (February 2025). Simultaneously, a public conflict has erupted between Paramount Skydance and Netflix. Per Cord Cutters News (June 2026), Paramount Skydance’s chief legal officer, Makan Delrahim, accused Netflix of a 'scorched-earth' campaign to poison regulators against the deal. Netflix, which had its own $82.7 billion bid for WBD’s studio and streaming assets rejected in February 2026, dismissed the claim as 'absurd' via a spokesperson. Paramount Skydance further alleged that Netflix is leveraging third-party groups, including the International Brotherhood of Teamsters, to lobby against the consolidation. Domestic pressure is also mounting in the U.S. and UK. Per IBC (June 2026), the UK’s Competition and Markets Authority (CMA) launched its Phase 1 inquiry on June 10, with a decision due by August 7. In the U.S., several states including New York and California are finalizing a lawsuit to block the merger on the grounds that it would reduce the number of major Hollywood studios to four. This consolidation has drawn 'unequivocal opposition' from a group of over 1,000 directors and executives, including Christopher Nolan and J.J. Abrams, who argue the merger will diminish content diversity and labor opportunities throughout the production ecosystem.
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