Paramount secures EU approval for $110B Warner Bros. deal

The European Commission's conditional clearance removes a major regulatory hurdle for what would be the largest media merger in history, though legal challenges in the US and UK scrutiny remain unresolved.

The European Commission on Wednesday conditionally approved Paramount's $110 billion acquisition of Warner Bros. Discovery, clearing the deal in all 27 EU member states after Paramount agreed to exit its film distribution venture with Universal Pictures.

"The commitments fully address the competition concerns by ensuring that the films of the merged entity will not be distributed jointly with those of Universal or Disney," the European Commission said in its decision.

Paramount agreed to terminate its stake in United International Pictures, its joint venture with Universal Pictures, within 13 months of closing. It also pledged not to enter any co-distribution agreement with NBCUniversal in the European Economic Area for 10 years. The EC's investigation found sufficient competition from Disney, Sony, Amazon MGM Studios, A24, Lionsgate and European studios in film production, but flagged concentration risks in theatrical distribution.

The approval from Brussels brings the deal one step closer to creating a media conglomerate controlling HBO Max, Paramount+, CBS, CNN and roughly one-third of US theatrical film distribution. But the merger faces a federal restraining order in California, where 12 Democratic state attorneys general sued to block it on antitrust grounds, and potential intervention from the UK's Culture Secretary, with a decision due by Aug. 7.

Paramount Chief Legal Officer Makan Delrahim said the company appreciated the EC's "constructive engagement" and noted that 65 jurisdictions have now cleared the transaction or chosen not to challenge it. The US Department of Justice approved the deal in April.

The deal's most immediate threat is a Sept. 30 deadline. If the merger is not completed by Oct. 1, a ticking fee of 25 cents per share per quarter kicks in — roughly $7 million a day — payable to Warner Bros. Discovery shareholders. If the deal collapses entirely due to regulatory issues, Paramount must pay a $7 billion termination fee.

US Legal Challenge Intensifies

US District Judge Araceli Martínez-Olguín of the Northern District of California, a Biden appointee, barred Paramount from closing the deal for 14 days on Monday and scheduled an Aug. 3 hearing on the states' motion for a preliminary injunction. The lawsuit, led by California and joined by 11 other Democratic state attorneys general, argues the combined company would control nearly one-third of the US theatrical film distribution market and a similar share of basic cable programming.

Paramount has pushed back, arguing that the EC's conclusions "directly refute key assumptions that underpin the state AGs' complaint." The company noted that the European regulator did not find that blockbuster films constitute a separate relevant market and considered streaming platforms as direct competitors to linear TV — conclusions that undermine the market definitions in the state lawsuit.

UK Decision Looms

In the UK, Culture Secretary Lisa Nandy informed the companies in June that she is "minded to intervene" in the deal. A final decision on whether to clear the merger or escalate to a Phase 2 investigation is expected by Aug. 7.

The deal would give control of CNN to David Ellison, the son of Oracle billionaire Larry Ellison, after Trump has repeatedly criticized the network. Ellison has already installed Bari Weiss to run CBS News following his acquisition of Paramount, raising questions among CNN's top anchors about the network's future independence.

Beyond regulatory hurdles, the Ellisons face a separate lawsuit from a Paramount shareholder alleging they cut a backdoor deal with President Trump to secure approvals. The Writers Guild of America and a group of consumers have also filed suits to block the merger, though a judge denied the consumers' request for a preliminary injunction.

This article is for informational purposes only and does not constitute investment advice.