Paramount is clearing one hurdle after another to complete its stunning acquisition of Warner Bros. Discovery, but there are still a few obstacles left in its path.
WBD stockholders finally approved the Paramount Skydance offer for the whole company after weeks of public and private maneuvering to outbid Netflix, which was after just the studio and streaming side of the company. The proposed acquisition could lead to the development of a huge media empire with sports at the center of it, given the live properties under both the CBS Sports and TNT Sports banners.
However, the inflated price paid by the Ellisons at $31 per share for the entire company is leading to the question of how exactly Paramount is going to pay for it given their own balance sheet.
That’s the question of a group of six Democratic senators, who have sent a letter to FCC chairman Brendan Carr objecting to foreign influence over the acquisition. Specifically, they note the equity stakes in the merged asset that would be held by “sovereign wealth funds of Saudi Arabia, the United Arab Emirates (UAE), and Qatar.”
“Section 310 of the Communications Act prohibits companies with more than 25% foreign ownership from indirectly owning TV or radio broadcast stations. This provision was meant to ensure powerful media companies are ultimately controlled by American citizens. Paramount, however, seeks an exception far exceeding the 25% statutory cap. Congress enacted these restrictions on foreign ownership of broadcasters because of concerns about the “foreign dominance of the cables and the dangers from espionage and propaganda disseminated through foreign-owned radio stations in the United States” during the First World War.3 The foreign governments behind this investment systematically suppress press freedom in their own countries and have made a series of investments and gifts to entities controlled by the President and his family, raising serious concerns,” the letter states.
According to the Wall Street Journal, the equity stakes from Saudi Arabia and others total $24 billion. Paramount has officially asked that those regulations be waived so the merger can proceed.
While the concerns are very different, it is reminiscent of the proposed Nexstar acquisition of Tegna. In approving that merger, Carr and the FCC waived a provision that limited a single company from owning TV stations covering 39% of US households. The Nexstar-Tegna conglomerate would cover 60% of households.
Given the political and business connections between Paramount, the Trump administration, and Saudi Arabia, it would be shocking if we didn’t see something similar play out in this case. The concerns may be legitimate, and skepticism may abound over the financing and fallout, but that’s likely not enough to stop this deal from getting done.
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