Paramount to exit Universal joint venture for EU merger approval

Paramount to exit Universal joint venture for EU merger approval

Paramount Skydance has committed to withdrawing from United International Pictures (UIP), its film distribution joint venture with Universal Pictures, to secure approval from the European Union for its acquisition of Warner Bros. Discovery. The move follows antitrust concerns raised by European cinema operators regarding the consolidation of market power in the theatrical sector.

The European Commission’s antitrust authorities suggested the divestiture last week. According to EU Competition Chief Teresa Ribera, the goal is to ensure that alternatives exist for filmmakers and producers to get content into homes and theaters. The London-based UIP, established in 1981, once served as a major international distributor for both studios but now operates in a small number of European markets, including Sweden, Poland, Norway, Hungary, Croatia, Greece, and Denmark.

A regulatory filing made public Wednesday confirmed the commitment. Paramount also considers submitting a formal proposal to divest the joint venture on June 30. This submission will trigger an automatic 10-working-day extension of the European Commission's preliminary review deadline, moving the target date from July 7 to July 21. Some reports indicate the new deadline is July 22.

The acquisition, which values Warner Bros. Discovery at $81 billion in equity and $110 billion in enterprise value, would combine a massive portfolio of assets. The merged entity would include Paramount Pictures, CBS, CBS News, and Paramount+, alongside WBD’s HBO, HBO Max, Warner Bros. Pictures, CNN, TNT, TBS, and HGTV. Together, these companies possess more than 15,000 film titles and a combined streaming base exceeding 200 million subscribers.

The deal is funded through a complex financial structure:

• $47 billion in new Class B Paramount equity at $16.02 per share, backed by RedBird Capital Partners and the Ellison family.
• $54 billion in debt commitments from Apollo, Citigroup, and Bank of America.
• A combined $24 billion investment from the Qatar Investment Authority, Abu Dhabi’s L’imad Holding Company, and Saudi Arabia’s Public Investment Fund.
• A planned rights offering of up to $3.25 billion.

While the U.S. Department of Justice cleared the merger on June 12, concluding it would not harm consumer interests or restrict competition, other hurdles remain. In the U.K., Culture Secretary Lisa Nandy said Tuesday she is considering intervening over media plurality concerns, specifically the combination of TNT Sports and the broadcaster Channel 5 with HBO Max and Paramount+. Britain’s Competition and Markets Authority is conducting a separate review to inform her final decision. A Paramount spokesperson stated the company is confident that our proposed transaction does not pose any media plurality issues in the UK.

Domestically, Paramount faces the possibility of a lawsuit from a coalition of U.S. States, including California and New York. This potential action is pending a decision from California AG Rob Bonta. Additionally, Senator Elizabeth Warren (D-MA) has called for further investigation into the significant amount of foreign funding involved in the deal. The transaction is also being evaluated under the EU's Foreign Subsidies Regulation, though Paramount is currently expected to receive unconditional approval under that specific framework.

The strategic drive behind the merger is a defense against streaming giants like Amazon and Disney. Paramount CEO David Ellison stated in March that the move is not about consolidation. It's about reinventing the business. He later added that the combination aims to honor the legacy of two iconic companies while accelerating our vision of building a next-generation media and entertainment company. WBD CEO David Zaslav noted the outcome maximizes the value of our iconic assets and our century-old studio while delivering as much certainty as possible for our investors.

To further allay industry fears, Paramount has committed to a 45-day global theatrical window before films move to paid VOD and will release a minimum of 30 theatrical films annually. The company expects the merger to generate more than $6 billion in synergies through real estate consolidation, procurement savings, and technology integration.

Paramount expects to close the deal by the end of September 2026. However, a financial penalty known as a ticking fee applies if the transaction extends beyond September 30, 2026. This penalty adds 25 cents per WBD share per quarter—roughly $7 million per day or $627 million per quarter—creating a strong financial incentive to resolve the remaining regulatory issues in the U.K. And EU.