Paramount Skydance has notched a needed win as it continues to pursue its $111-billion deal to buy Warner Bros. Discovery.
On Wednesday, the European Commission gave its consent, allowing tech scion David Ellison’sindustry-reshaping merger to move forward in the countries that make up the European Union.
European regulators added just one condition: Paramount must end a partnership with Universal Pictures to share distribution of movies in Europe. Beyond that, regulators concluded that even with the proposed Paramount-Warner consolidation there was plenty of other studios making movies to avoid competitive harms.
“The Commission found that, at film production level, enough film studios remain as competitors,” the European Commission said in a statement. “These include other major US studios like Disney, NBC Universal … and Sony, along with smaller US studios such as Amazon MGM, A24 and Lionsgate, as well as European studios.”
But the merger would result in a “high concentration” of film distribution, the commission said, so Paramount would have a year to end its joint venture, United International Pictures, which distributes Paramount and Universal films to cinema owners in Europe. Adding Warner Bros. would give that firm too much heft, the commission said.
Paramount must not “directly or indirectly … enter into any agreement or understanding with Universal to jointly co-distribute films” in the European countries for 10 years, the commission said.
Despite early concerns about dominance in the children’s television market, Paramount will not be required to divest Cartoon Network, a Warner asset, because of its ownership of Nickelodeon.
“The Commission found that streaming platforms offering children’s content will continue to act as a competitive constraint on the merged entity’s TV channels,” the agency said.
“The combination of Paramount and WBD will create a stronger, well-capitalized, creative-first media company that is better positioned to compete with companies like Netflix that have come to dominate the industry for audiences, premium content, and creative talent,” Paramount said in a previous statement.
The European Commission’s approval came two days after Ellison’s firm was dealt a substantial setback.
A federal judge in Oakland on Monday issued a temporary restraining order preventing Paramount from finalizing the acquisition for at least 14 days as that court case heats up. The decision came after 12 state attorneys general, led by California Atty. Gen. Rob Bonta, filed a lawsuit last week alleging the merger would violate U.S. antitrust rules.
District Judge Araceli Martínez-Olguín scheduled an Aug. 3 hearing to determine whether a longer-term pause is warranted. The states are expected to seek a preliminary injunction, which would tie up Paramount’s merger for months.
“This is not remotely over. The United States is not Europe,” deal critic Alvaro Bedoya, a former Federal Trade Commission member who is now a senior adviser at the American Economic Liberties Project, said in a Wednesday statement.
The European Commission joins regulators in Australia, Austria, Brazil, Canada, China, Saudi Arabia, Serbia and South Africa that have found the deal would not crush competition in their markets. Britain’s Competition and Markets Authority is still investigating the merger’s impacts.
Paramount secured approval from the U.S. Justice Department last month. The company was hoping to close its blockbuster acquisition of Warner Bros., which owns HBO, CNN and the Burbank studios behind such popular characters as Batman, Superman, Harry Potter, Scooby-Doo, by the end of September to avoid a larger payout to Warner Bros. Discovery shareholders.
In a show of confidence earlier this year, Paramount offered Warner investors $31 a share for their stakes.
Paramount also agreed to pay a “ticking fee” of $.25 per share for every quarter after Sept. 30 that the deal drags on — payments that would add nearly $7 million a day to the cost of buying Warner Bros. Paramount triumphed over Netflix, which withdrew its bid in late February when Paramount raised its bid.
Larry Ellison, co-founder of software giant Oracle, is bankrolling his son’s ambitions to acquire a second major entertainment company in less than a year. The Ellison family acquired the smaller Paramount in August.
The WGA joined the legal fray last week by filing its own antitrust complaint against Paramount, alleging the proposed union of two of Hollywood’s biggest studios would lead to fewer jobs and lower pay for writers. The WGA is also seeking an injunction.
Both sides appear to have some momentum. Democrat state attorneys general were encouraged by Martínez-Olguín’s ruling.
Their 37-page lawsuit alleges that Paramount’s proposed takeover — the largest Hollywood deal in decades — would violate the U.S. Clayton Antitrust Act, a century-old law to prevent mergers that weaken competition and raise costs for consumers.
In her order granting the states’ request for a temporary restraining order, Martínez-Olguín wrote: “The Transaction would also be difficult, if not impossible, to unwind if permitted to proceed given the anticipated consolidation of operations, sharing of business-sensitive information, and potential termination or reassignment of employees.”
Paramount also faces a potential $7 billion payment to Warner Bros. should the company fail to close the transaction by next summer.
Paramount is the smallest of the major media companies and acquiring Warner Bros. is key to David Ellison’s ambitions to build a new Hollywood colossus.
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