Key Takeaways:
Three Democratic senators are demanding the FCC block the $110 billion Paramount-Warner Bros Discovery merger over foreign ownership concerns.
Three Democratic senators demanded the FCC pause the $110 billion Paramount-Warner Bros Discovery merger, citing foreign investment that could approach 49.5 percent of the combined entity.
"The FCC must foreclose any attempt by Paramount to close this transaction before an adequate review of foreign investors is completed," Senators Cory Booker, Adam Schiff and Elizabeth Warren wrote in a joint letter to FCC Chairman Brendan Carr.
Under Section 310 of the 1934 Communications Act, foreign individuals and governments are generally barred from owning more than 25 percent of a US firm holding an FCC broadcast license. Paramount disclosed in an April financial filing that Saudi Arabia's Public Investment Fund, along with entities based in the United Arab Emirates and Qatar, would hold equity stakes in the new corporation. The Ellison family, led by CEO David Ellison, would control all voting rights through US entities, Paramount told the FCC.
If approved, the merger would bring CNN and CBS News under one corporate owner, further consolidating US news media into a $110 billion entity. The senators gave Carr a July 1 deadline to notify Paramount that the deal cannot close until the foreign investment review is complete. The FCC's pending approval represents the largest regulatory hurdle for the transaction after the Department of Justice signaled last week it would not challenge the deal on antitrust grounds.
The DOJ's antitrust division concluded after an eight-month review that "the transaction is not likely to result in harm to competition or American consumers" across on-demand streaming, linear television and studio production. California Attorney General Rob Bonta is leading a coalition of states preparing a lawsuit to block the merger, while more than 5,000 filmmakers and actors signed an open letter in April arguing it would stifle competition and reduce job opportunities.
The last time the FCC blocked a major media merger on foreign ownership grounds was in 2014, when it rejected the $45 billion Comcast-Time Warner Cable deal because of concerns over market concentration. That decision preceded a 12 percent decline in Comcast's share price over the following quarter. The current regulatory scrutiny comes as the broader media sector faces pressure from cord-cutting and streaming competition, with traditional TV advertising revenue declining roughly 8 percent year-over-year across the industry, according to Magna Global estimates.
The uncertainty surrounding the merger has weighed on both companies' stocks. Paramount shares have traded in a range reflecting deal uncertainty, while Warner Bros Discovery's stock has declined approximately 15 percent year-to-date as investors price in regulatory risk. The broader S&P 500 media and entertainment sub-index has fallen about 4 percent over the same period, underperforming the S&P 500's gain of roughly 6 percent.
For investors, the outcome of this review carries significant implications. If the FCC blocks or delays the merger beyond July 1, Paramount and Warner Bros Discovery shares could face renewed selling pressure, given the deal's $110 billion valuation already reflects expected synergies. A rejection would also set a precedent limiting foreign investment in US media assets, potentially chilling future cross-border M&A in the sector. Conversely, approval with conditions could open the door for other foreign-backed media combinations, reshaping the competitive environment.
The senators' July 1 deadline creates a near-term catalyst for the FCC to act. If Carr's FCC rejects Paramount's petition for preemptive approval under Section 310, the deal could face months or years of additional review. The Ellison family's assertion that the arrangement poses "no national security, law enforcement, or foreign or trade policy concerns" is unlikely to satisfy the senators, who urged Carr not to take those statements "at face value."
This article is for informational purposes only and does not constitute investment advice.
