Paramount expected to easily secure EU nod for Warner Bros deal

Paramount Skydance PSKY.O is expected to easily gain European Union antitrust approval to buy Warner Bros DiscoveryWBD.O while divestments, if required to address regulatory concerns, will likely be minor, two people with direct knowledge of the matter said on Friday.

Unlike Netflix’s NFLX.O aborted bid, Paramount’s offer faces fewer regulatory hurdles because a combined Paramount and Warner Bros has a market share of below 20% in all markets across Europe, the people said. They spoke anonymously because of the sensitivity of the matter.

European Commission antitrust regulators usually take a tough line when market share is 30% or more. Paramount has yet to formally seek EU approval, but is providing information on its businesses.

The deal would also require approval under the EU’s foreign subsidies regulation because Saudi Arabia’s Public Investment Fund, Abu Dhabi’s L’imad Holding Company and the Qatar Investment Authority are also bankrolling the bid. The FSR targets unfair foreign state aid.

Paramount declined to comment. The Commission did not immediately respond to a request for comment.

PARAMOUNT OPEN TO DIVESTING MINOR CHANNELS: SOURCES

While Paramount hopes to secure unconditional EU approval, the company is willing to divest minor channels such as its children’s brands if required, the people said. Overlapping businesses include the combination of two studios and several TV channels.

Paramount has Nickelodeon while Warner Bros owns the Cartoon Network.

Paramount will likely seek formal EU approval in the coming months, the people said, which will then kick off a 25-working-day preliminary review, which can be extended by 10 working days if remedies are offered at the end of the 25 days.

California may be the biggest obstacle to the deal. Regulatory approvals from the U.S. and UK are also key deal requirements.

Paramount has been on the charm offensive in Europe since January, with CEO David Ellison meeting French President Emmanuel Macron that month while Chief Legal Officer Makan Delrahim met the European Commission’s top merger official Guillaume Loriot that same week, the people said.

Delrahim is well-acquainted with Loriot from his previous stint as assistant attorney general at the U.S. Department of Justice’s antitrust division.

European Parliament lawmaker Andreas Schwab, who has criticised Netflix’s bid and led the negotiations in several pieces of tech legislation in recent years and also met Delrahim last month, said a Paramount bid poses fewer issues.

“I think Paramount is something we could accept. It is a concentration in the production of films. There is no risk of a digital champion taking over the video streaming market,” he said.