Congressman Sam Liccardo (D-CA) and Congresswoman Ayanna Pressley (D-MA) expressed concerns Wednesday about the impact of foreign investors’ involvement in Paramount’s all-cash, $30 per share hostile takeover bid on national security in a letter to Warner Bros. Discovery CEO David Zaslav and the company’s board.
Paramount’s $108.4 billion, all-cash offer includes over $41 billion of equity and $54 billion in committed debt financing that is fully backstopped by the Ellison family, whose family trust has over $250 billion in Oracle stock, and RedBird Capital Partners. But $24 billion of that financing comes from Middle Eastern sovereign wealth fund partners.
Approximately $17 billion is reserved to allow Warner Bros. Discovery to extend its existing bridge loan.
“A merger of this scale, involving two of the nation’s most influential media companies, carries implications far beyond ordinary commercial consolidation. Warner’s platforms reach tens of millions of American households through HBO, Max, CNN, Warner Bros. Pictures, Discovery, and numerous digital and cable properties. They also shape the news, entertainment, and cultural content consumed by the American public,” the pair wrote. “Any transaction providing foreign investors with governance rights, access to non-public data, or indirect influence over content distribution creates vulnerabilities that foreign governments could exploit.”
“These investors, by virtue of their financial position or contractual rights, could obtain influence—direct or indirect—over business decisions that bear upon editorial independence, content moderation, distribution priorities, or the stewardship of Americans’ private data,” the letter continues. “Even absent overt control, such influence can present a national-security threat when foreign state-linked entities have strategic interests inconsistent with those of the United States.”
Other partners in the bid include Bank of America, Citibank, Apollo Global Management and Jared Kushner’s Affinity Partners.
Liccardo and Pressley are demanding Warner Bros. Discovery file a notice with the Committee on Foreign Investment in the United States (CFIUS) for a national security review if it accepts Paramount’s offer. They warned that failure to do so would represent a “serious lapse in fiduciary judgment and could expose the company to significant regulatory and reputational harm.”
Additionally, the pair warned that future Congresses may recommend that regulators push for divestitures, which would “undermine the strategic logic” of doing a potential deal with Paramount.
“The American public relies on Warner’s platforms for news, entertainment, and vital information. Allowing foreign-backed investors to obtain influence over this ecosystem without the fullest possible scrutiny would be irresponsible and dangerous,” the letter concluded. “As stewards of one of the nation’s most important media institutions, the Board of Directors has a responsibility to ensure that any potential transaction protects both national security and the long-term interests of Warner Bros. Discovery’s shareholders.”
Liccardo and Pressley are asking for Warner Bros. Discovery to respond to its letter by Dec. 22. A spokesperson for WBD declined to comment.
A mandatory CFIUS review would be triggered if a foreign entity obtains a 25% or more voting interest in a U.S. company and a foreign government holds a 49% or greater voting interest in that foreign investor.
A transaction resulting in a foreign person holding 10% or less of the voting interest in a U.S. business is generally excluded from review only if it is a purely passive investment with no access to nonpublic information or governance rights beyond voting shares.
The Ellisons are expected to maintain a majority ownership in a combined company. In an effort to avoid a CFIUS review, Paramount scrapped $1 billion in financing from China’s Tencent Holdings. Affinity Partners and the Middle East sovereign wealth funds also agreed to forego governance rights, including board representation.
Paramount’s tender offer will be open for 20 business days, or until Jan. 8, and Warner Bros. Discovery’s board will need to respond with a recommendation within 10 business days, or by Dec. 22. Paramount also has the option to extend the offer’s deadline. Under the terms, shareholders have withdrawal rights that expire at 5 p.m. ET on Jan. 8. Those rights would be extended if Paramount extends the tender offer.
The offer is aimed at thwarting Netflix’s $82.7 billion deal struck with Warner Bros. Discovery last week for the company’s studio and streaming assets. The deal, which is valued at $27.75 per WBD share, is a combination of cash, Netflix stock, and committed debt financing from Wells Fargo, BNP and HSBC.
Netflix can counter Paramount’s offer, though CEO David Ellison has said it is not his “best and final.”
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