European Commission flags Paramount-WB financing as foreign subsidies risk in $110B deal

The European Commission has opened an investigation into the Paramount-Warner Bros. Discovery merger, zeroing in on how foreign investors would finance the $110 billion deal. The regulator is examining the transaction under the EU’s Foreign Subsidies Regulation, with a provisional deadline set for July 14. In other words: even if the traditional merger competition review says “go,” the foreign-money structure can still become a second lane that has to clear.

This foreign investment review is separate from the EC’s Phase 1 merger investigation, which has its own provisional deadline of July 7. Put those dates together and you get a simple reality for anyone tracking big media consolidation: multiple regulators can move on parallel timelines, and “approved in one place” does not automatically mean “finished everywhere.”

The ownership math matters because Paramount previously disclosed that foreign investors would account for 49.5% of the equity of the combined company, according to its petition with the FCC. Paramount’s filing asked the FCC for approval for foreign investors “in the aggregate to indirectly hold up to 100 percent of its equity and/or voting interests in light of routine fluctuations in publicly held equity interests and to account for potential future investments.” The company emphasized that the ownership stake would not result in a transfer of control, and that it would not hold governance rights or board seats.

The foreign investor lineup Paramount disclosed is not a single actor, but a cluster. Three Middle Eastern sovereign wealth funds would own a total of 38.5% of the non-voting equity in Paramount after the deal closes. Saudi Arabia’s Public Investment Fund would own 15.1%, L’Imad Holding Company would own 12.8%, and the Qatar Investment Authority would own 10.6%. Other foreign equity owners include “passive limited partner investors” in funds managed by RedBird Capital Partners, which would account for 5.8%, and foreign-based entities that have acquired the company’s Class B stock, who would control 5.2%.

That distinction between equity, voting, governance rights, and control is the kind of detail regulators often care about, because it changes the practical question: who can actually influence decisions? Paramount is already fighting that battle on another front, too. In addition to the EC, the foreign investment review is also being reviewed by the U.S. Federal Communications Commission. Meanwhile, the UK’s Competition and Markets Authority is also in the mix and will decide whether to refer the transaction for a more in-depth Phase 2 investigation by Aug. 7.

This is not Paramount’s first step of engagement with regulators. The company says David Ellison-led Paramount previously met with U.K. Secretary of Culture, Media and Sport Lisa Nandy and other European regulators in January to tout the benefits of the deal. Ellison also met with U.S. Department of Justice officials in May to discuss the transaction. The DOJ’s Hart-Scott-Rodino review period expired in February, but the source notes that the regulator can still get involved at any time in the process. That matters because it reinforces a pattern common in mega-deals: early review windows close, but legal and competitive scrutiny does not necessarily disappear.

The merger is also under legal pressure. Paramount is cooperating with state attorneys general that have issued subpoenas, or civil investigative demands, focusing on the DOJ investigation and the competitive effects of the merger. Around 10 state AGs, including California and New York, are preparing to file a lawsuit as soon as this month to block the merger, two individuals familiar with the matter previously told TheWrap. California Attorney General Rob Bonta previously told TheWrap that “red flags are everywhere when you have a merger of this type” and that the states are prepared to “act timely,” while declining to provide a specific timeline for when a decision could be made.

Outside the U.S. and Europe, there is also evidence of a complex clearance map. Paramount said in an SEC filing on Wednesday that it has secured regulatory approval from the Australian Competition and Consumer Commission, subject to a 14-calendar day waiting period that expires June 23. The ACCC said the deal is “unlikely to have the effect of substantially lessening competition in relation to the wholesale supply of films for theatrical release in Australia.” It added that while the deal would “remove competition between Paramount and Warner Brothers,” the merged entity would continue to be constrained by other film studios post-acquisition. The New Zealand Commerce Commission told Paramount it “does not intend to consider the Merger further,” noting that the relevant clearance regime is voluntary and that the NZCC does not give informal clearances to parties.

Meanwhile, the deal has received clearances from competition authorities in Saudi Arabia, Ukraine, Serbia and North Macedonia, and foreign direct investment authorities in Germany, Slovenia, Belgium, Czechia, New Zealand, Italy, France, and Romania. A Paramount spokesperson told TheWrap: “Collectively, these approvals underscore a powerful, pro-competitive transaction which will create a well-capitalized, creative-first company positioned to compete against the large tech and media players that dominate the industry today.” (That line is clearly a PR push, but it does frame why foreign ownership is part of the strategic story, not just the regulatory one.)

Corporate timing and financial consequences also matter. The deal, approved by Warner Bros. shareholders in April, is currently on track to close by the end of the third quarter. If it does not close by Sept. 30, WBD shareholders receive a 25 cent per share “ticking fee” for each quarter until closing. If the transaction does not close at all due to regulatory matters, Paramount will pay WBD a $7 billion termination fee.

For executives at other media and tech-adjacent platforms, this is the bigger takeaway. When deals combine competition scrutiny with foreign investment structure, the risk is not just “will regulators approve.” The risk is that one regulator clears the merger while another challenges the funding mechanism, forcing management to manage multiple narratives, multiple deadlines, and multiple interpretations of control. In a market where consolidation is often pitched as “scale for creativity” and “competition with big tech,” the EC’s foreign subsidies lens is a reminder: regulators can still scrutinize the money that makes the scale possible.