Paramount bid for Warner Bros Discovery faces UK probe

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The UK competition regulator has announced it will investigate Paramount Skydance Corporation’s $110bn bid for Warner Bros Discovery.

So what? In a world of global media deals it’s not just the home country that gets to rule on a merger. David Ellison, chief executive of Paramount Skydance, now faces:

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  An investigation by European Union antitrust authorities with a deadline set for 7 July;

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  Legal challenges from up to 10 US states, including California and New York;

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  An ongoing Department of Justice (DoJ) review;

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  The fallout from a flurry of controversial hirings and firings in Paramount’s CBS newsroom; and

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  Donald Trump’s appeal to the supreme court over his failed $475m defamation suit against Warner-owned CNN.

PSky’s the limit. This is an enormously complicated bid that will create a powerhouse controlling the Paramount and HBO Max streaming services, Channel 5 and TNT Sports, which has the rights to the Champions League, Premier League and the Olympics – as well as the two Hollywood studios.

The UK’s Competition and Markets Authority (CMA) wants insight into David Ellison’s business plan. The bid is backed by a $40bn guarantee from his father, Oracle boss Larry Ellison. David Ellison has a large stake in Paramount, but it’s a publicly traded company with other shareholders. The Warners bid looks like a private equity vehicle, backed by RedBird Capital, debt financing and money from the sovereign wealth funds of Saudi Arabia, Qatar and the UAE.

“The Ellisons want to save $6bn, the product of the high level of leverage in this deal. How much is cost cutting? How much is revenue raising? How much is hocus pocus?” one analyst said.

CMA phase one. Before launching its review, the CMA invited comments, including from cinema chains who fear the shrinking of the movie studio market and expect Paramount to cut back the total number of films a so-called Warnermount would produce. The CMA said it will decide by 7 August whether the deal warrants a more in-depth phase two investigation, which can take up to five months and would push the deadline for deal well past David Ellison’s promised September deadline, incurring extra costs for the bid.

President, my president. The DoJ, largely run by Trump appointees, seemed about to approve the deal in May, with Trump keen on an Ellison victory. Paramount’s chief legal officer Makan Delrahim alleged last week that the delay in a DoJ announcement is the result of failed rival bidder Netflix lobbying hard against the deal. In a 5 June letter to lawyers in the DoJ’s Antitrust Division, Delrahim wrote that “Netflix’s panic-level response and scorched-earth campaign to try and poison regulators and other stakeholders against the Transaction shows just how seriously Netflix takes Paramount as a scaled competitor”.

You can have the kids. The deal combines Nickelodeon, the Cartoon Network and Looney Tunes, and PSky has already told the EU it will divest children’s channels if need be. The EU’s initial deadline for a ruling on the deal is 7 July. Paramount has also submitted proposed terms to California and other US states in a bid to prevent their legal actions. Paramount is understood to have offered local job and production guarantees.

Bari-ing CBS. As part of his plan to keep the Trump administration happy, Ellison hired right-leaning journalist Bari Weiss to oversee CBS News. Weiss ousted staff, brought in new hires and alienated presenters. Scott Pelley, a 60 Minutes anchor, was fired last week for interrogating Nick Bilton, who Weiss appointed as the show’s new boss, despite his having no TV experience. Pelley went on to accuse Weiss of “murdering” 60 Minutes in a New York Times article.

What’s more… Ratings have fallen below those of rivals. The mid-term elections usually offer ratings and revenue, but if CBS News is perceived as partisan, marketers may move money elsewhere. Broadcast news is seen as less polarising than cable or the clatter of the internet. Ad agencies fear change. If the deal is done, Weiss’s wings may be clipped.

Photograph by Justin Sullivan/Getty Images