The European Commission granted conditional approval for the merger after Paramount agreed to break up a long-standing movie distribution deal with Universal Pictures in Europe. Within 13 months of closing the deal, Paramount has to end that agreement entirely. The European Commission said in its decision that the commitments "fully address the competition concerns identified by the commission by ensuring that the films of the merged entity will not be distributed jointly with those of Universal or Disney."
That condition is straightforward enough. But the deal is far from finished.
By merging, the two companies would form a media giant that unites Paramount's film and cable assets with Warner Bros.'s extensive content library and HBO. The combined entity would rival Disney and Netflix in size and scope, yet regulators worry about concentrated power in an industry already dominated by a few players. The EU condition specifically targets a distribution tie-up that could have given the new giant unfair advantages over smaller competitors.
The proposed merger comes amid a wave of consolidation in the media industry, as traditional studios struggle to compete with streaming giants like Netflix and Disney+. Paramount and Warner Bros. have each faced challenges in the shifting landscape, with declining cable TV revenues and the high cost of content production. The combined entity would have significant leverage in negotiating distribution deals and controlling intellectual property, which has drawn scrutiny from regulators worldwide.
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California and eleven other states filed a lawsuit on July 13 aiming to stop the merger. They contend that the acquisition would stifle rivalry in the markets for film and cable TV distribution.
David Ellison, the CEO of Paramount Skydance Corp., is offering $31 per share for Warner Bros. Discovery Inc. That price looked aggressive when Netflix lost the bidding war for the company.
Paramount has until the end of September to close the deal. The pressure to get through court is real.
On top of the U.S. lawsuit, the UK's culture and media secretary has raised concerns about media ownership diversity. That could lead to a British government review.
Mergers of this size rarely go completely according to plan. The EU approval removes one big hurdle, but the U.S. court fight and potential UK review add uncertainty.
If you own Warner Bros. Discovery stock, the $31 per share offer is the target price right now. If the deal closes, shareholders get that. If it does not, the stock could swing.
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