The FCC has approved an investment in the Paramount-Warner Bros. Discovery merger by a group of foreign investors, including three Middle Eastern sovereign wealth funds.
Per a declaratory ruling on Thursday, the agency granted the David Ellison-led media giant’s request for foreign investors to indirectly hold a stake in excess of 25% in the aggregate, more than 5% each in the equity of Paramount through non-voting Class B shares and advance approval to hold up to 20% each of the indirect equity in Paramount in the future. The FCC also found that it is “in the public interest to permit up to 100% indirect foreign equity interest of Paramount, in the aggregate.”
Foreign investors will own 49.5% of the non-voting equity in Paramount, with 38.5% of that total controlled by three Middle Eastern sovereign wealth funds.
Saudi Arabia’s Public Investment Fund will hold an equity stake of 15.1%, the United Arab Emirates’ L’imad Holding Company will hold a stake of 12.8% and the Qatar Investment Authority will hold a stake of 10.6%, per the ruling. Other foreign equity owners include “passive limited partner investors” in funds managed by RedBird Capital Partners, which account for 5.8%, and foreign-based entities that have acquired the company’s Class B stock, who control 5.2%.
The FCC’s greenlight follows the completion of a national security review by the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector (Team Telecom), which recommended approval subject to commitments from Paramount related to U.S. data protections and restrictions on the rights and access of the foreign investors.
The Ellison family and RedBird will continue to 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 Ellisons indirectly hold 77.5% of the Class A shares as well as approximately 40% of the non-voting Class B shares, while RedBird Capital Partners indirectly holds the remaining 22.5% of the Class A shares and approximately 9% of the non-voting Class B shares.
The order includes a provision that Paramount must obtain a new FCC approval if its foreign voting interests exceed 25% in the aggregate or if it proposes to change the voting interests of any of the approved foreign investors.
“We appreciate the FCC’s careful review and are pleased that it has granted Paramount’s petition consistent with its established process,” a Paramount spokesperson said in a statement. “At a time when the media industry faces unprecedented competitive pressure from dominant big tech companies, a combined Paramount-WBD will have the scale and resources necessary to compete, invest, innovate, and deliver premium content to audiences worldwide.”
The FCC’s approval comes after the deal has been cleared by Warner Bros. shareholders and regulators and governments representing 68 jurisdictions, including the U.S. Department of Justice, the European Commission and the United Kingdom’s Competition and Markets Authority.
However, the deal remains on hold due to pending litigation with a group of 12 state attorneys general and the Writers Guild of America, which is headed to trial in March. Paramount has agreed to delaying the closing of the merger until after the five days after the outcome of the trial, or June 1, 2027, whichever comes earliest.
Starting Oct. 1, Paramount is on the hook to start accruing a 25 cent per share ticking fee, which translates to a payout of $650 million per quarter or $7 million per day. The company has requested that the state AGs and WGA post a $1.9 billion bond to cover the the ticking fee and other financing costs, during the delay, which will be decided during a court hearing on Sept. 24.
Ellison has also threatened to move Paramount’s operations out of California if a settlement can’t be reached by the Oct. 1 deadline. A two-day settlement conference is scheduled for Oct. 14 and 15, but does not guarantee a resolution will be reached.
In the event that the deal does not close at all due to regulatory matters, Paramount will pay WBD a $7 billion termination fee.
