UK government may intervene in Paramount's Warner Bros. Discovery merger

UK government may intervene in Paramount's Warner Bros. Discovery merger

The UK government is likely to intervene in the acquisition of Warner Bros. Discovery (WBD) by Paramount Skydance, as officials weigh whether the mega-merger serves the best interests of British audiences.

Culture secretary Lisa Nandy announced in a written ministerial statement that she is minded to intervene in the deal. The move follows independent research and engagement with the companies involved. Nandy has written to both Paramount and WBD to outline her position, giving the companies until July 6 to make final representations before a formal decision is reached.

The primary concerns center on media plurality. Nandy cited the need for a sufficient plurality of views in news media and a sufficient plurality of persons with control of the media enterprises serving UK audiences. The combined entity would hold a vast portfolio of services, including CNN International, Channel 5, TNT Sports, Nickelodeon, Cartoon Network, Paramount+, and HBO Max.

Because the Enterprise Act 2002 does not cover public interest issues relating to streaming, Nandy indicated she may bring forward secondary legislation to allow Ofcom to examine how the merger would impact on-demand services.

If the intervention proceeds, a dual-track assessment will occur: Ofcom will report to the Department for Culture, Media and Sport (DCMS) on public-interest considerations, while the Competition and Markets Authority (CMA) evaluates the impact on competition. Nandy will then review these reports to decide if a more detailed CMA investigation is required.

The CMA, a non-ministerial government department, has already launched its own inquiry this month. It faces a deadline of August 7 to decide if it will proceed to a second phase of investigation.

The takeover, announced in February for a valuation cited between $110bn and $111bn, has already secured approvals from the US Department of Justice and regulatory bodies in China, Canada, and Australia. However, it continues to face hurdles in other territories.

In the European Union, the European Commission has until July 7 to make a decision. While reports suggest the Commission is expected to clear the deal, approval may be contingent on Paramount exiting UIP, a joint distribution venture with Universal Pictures.

Across the Atlantic, the deal faces potential opposition from a group of US states led by California. These states have suggested they may file suit to stop the merger, though no such lawsuit has been filed. Additionally, a report from L.A. County regarding potential lawsuits and big job losses has reportedly boosted action by state Attorneys General.

Paramount remains optimistic about its timeline. A spokesperson stated the company is confident that our proposed transaction does not pose any media plurality issues in the UK and maintains that the transaction timeline will not be delayed. Paramount aims to close the deal by the early fall, specifically by September 30, at which point the company has agreed to pay a ticking fee to WBD shareholders if the merger is not complete.

The immediate next steps depend on the July 6 deadline for company responses and the July 7 European Commission decision.