The Federal Communications Commission has approved foreign equity investments tied to Paramount’s proposed $111 billion acquisition of Warner Bros. Discovery, clearing a potential regulatory obstacle for the transaction.
In a decision issued Thursday, the Brendan Carr-led FCC granted Paramount’s petition to allow more than 25 percent of the studio’s ownership to be held by foreign investors. The investors identified in the proceeding include three major Middle East sovereign wealth funds: Saudi Arabia’s Public Investment Fund, the Qatar Investment Authority and the Abu Dhabi Investment Authority.
The ruling is significant because those funds are helping finance Paramount’s bid for Warner Bros. Discovery. According to SEC filings cited in the source material, the sovereign wealth funds are collectively providing roughly $24 billion in financing for the offer.
The investments have been structured as non-voting equity, meaning the funds will not receive governance rights. The source material also notes that the funds have previously bankrolled global buyout firms, including Apollo Global Management, which is among the groups financing the offer.
A Paramount spokesperson emphasized the company’s position that control of the combined business would remain with domestic voting shareholders once the transaction is completed.
“When the proposed transaction with Warner Bros. Discovery closes, the Ellison family and RedBird will collectively hold the largest equity stake in the combined company and 100% of the voting shares, with no other equity participant having any governance rights,” the spokesperson said.
FCC Finds Foreign Ownership Approval Serves Public Interest
In its Thursday ruling, the FCC concluded that allowing Paramount’s foreign equity ownership to exceed the usual benchmark for this type of deal is supported by the public interest. The commission said the arrangement would give the studio greater access to capital, which would allow it to compete more effectively in TV broadcasting.
The decision also addressed concerns raised earlier this year by Democratic lawmakers. In March, a group of senators urged the FCC to conduct a full review of the foreign financing behind the merger, citing worries that Middle Eastern sovereign wealth funds could exert influence over editorial decisions at CBS News and CNN.
The FCC rejected that concern in its ruling, finding that the investors “will not be able to wield any influence, let alone control, over decisions” involving Paramount and Warner Bros. Discovery.
The commission also said its approval is “consistent with the Commission’s longstanding goal of promoting foreign investment, including in the broadcast industry.”
Conditions Attached to the Approval
The FCC’s greenlight is not without restrictions. The ruling includes conditions intended to ensure that foreign investors may hold a substantial equity stake in Paramount without controlling the company or its broadcast operations.
Under those conditions, the foreign investors are barred from receiving governance rights. They also cannot access nonpublic U.S. data, among other limitations included in the decision.
The FCC said violations of the conditions could result in monetary sanctions and potential divestiture of the investments.
For Paramount, the decision removes a regulatory question around the financing of its proposed Warner Bros. Discovery acquisition while preserving the commission’s stated requirement that foreign capital not translate into control over the company or its broadcast assets.