London
The British government said Tuesday that it is likely to challenge Paramount Skydance’s acquisition of Warner Bros. Discovery, which could complicate the completion of the $110 billion merger.
British Culture Minister Lisa Nandy said in a statement that she was “determined to intervene” in Paramount’s quest to acquire CNN, HBO, the Warner Bros. film studio and other Warner Bros. Discovery assets, citing concerns about their potential impact on media diversity.
“Following engagement with the parties and an independent investigation, my Department has written today to the current and proposed owners of Warner Bros Discovery on my behalf to inform them that I am willing to intervene,” Nandy said in a statement.
In the United Kingdom, government officials use the term “willing” to announce that they will take action before taking legal steps to do so.
Nandy said he has not made a “final decision on intervention at this stage”. The companies now have one week to respond to their letter.
But Nandy clearly intends to intervene, and if he goes ahead, the investigation will be a major hurdle for Paramount to overcome. Britain’s media regulator Ofcom would be tasked with evaluating the deal, in addition to the Competition and Markets Authority investigation already underway.
Nandy said he was considering intervening on public interest grounds, including ensuring there is a “sufficient plurality of opinions in the media” and a “sufficient plurality of people in control of media companies.”
A spokesperson for Warner Bros. Discovery declined to comment on Nandy’s statement.
A Paramount spokesperson told CNN: “We are grateful for the continued constructive engagement with all interested government bodies and relevant authorities, including the United Kingdom. We are confident that our proposed transaction does not raise any media plurality issues in the United Kingdom and we remain confident in the stated transaction timeline.”
Paramount has said it expects the deal to take effect in the third quarter of this year, meaning the end of September. Corporate meetings on how to integrate Paramount and WBD have been taking place for months.
If Paramount does not obtain all necessary approvals by the end of September, an agreement is triggered that sweetens the deal, adding 25 cents per WBD share per quarter to the cost of the deal until it is approved.
That would add $627 million to the total cost of the deal each quarter, or about $7 million per day, creating an even greater financial incentive for Paramount to close the deal quickly.
But a review by Ofcom would take weeks at a minimum and could take months.
EU regulators have also been scrutinizing the deal, although the European Commission is not expected to stand in the way.
Paramount has already overcome regulatory hurdles in many other countries, including the United States, where the Justice Department approved the deal in early June without requiring any concessions. Critics have accused Paramount of reaching out to the Trump administration to obtain favorable treatment from the Justice Department.
The Justice Department said in a statement justifying the approval that “the transaction is not likely to result in harm to competition or American consumers.”
A federal committee in the United States is still evaluating whether the deal depends on financing from Middle Eastern countries. FCC Chairman Brendan Carr said, “We will go where the facts take us based on those reviews.”
A coalition of U.S. state attorneys general is also scrutinizing Paramount-WBD, and analysts expect them to file a lawsuit to block the merger this summer.
Appearing on MS NOW last weekend, California Attorney General Rob Bonta repeated his view that “there are red flags in the air everywhere” with the Paramount deal.
Bonta added: “We will make a decision in the coming weeks.”
Paramount executives have argued that an antitrust lawsuit by states would be meritless.
“This deal is pro-competitive and results in a stronger company better positioned to compete against dominant technology platforms in an industry increasingly defined by intense competition for audiences, talent, technology and investment,” the company said earlier this month.