European Commission regulators have approved Paramount’s merger with Warner Bros. Discovery, contingent upon Paramount terminating its distribution business with Universal in Europe. This marks a significant step in Paramount’s effort to complete its $111 billion acquisition of Warner Bros. Discovery, which is still hindered by a legal challenge from 12 U.S. states, pausing the merger temporarily.
Regulators assessed the merger’s implications for film production, distribution, media licensing, and broadcasting. They concluded that Paramount’s future distribution business posed the most substantial risk to fair market competition. Paramount and Universal operate a joint distribution company in Europe, Universal International Pictures (UIP), which regulators identified as potentially providing Paramount an unfair advantage when combined with Warner’s film catalog. “The transaction would have meant Warner’s films were also distributed via UIP and, without the commitments, it would have led to worse rental and distribution terms for cinema operators, ultimately disadvantaging consumers,” the European Commission said.
To satisfy the approval conditions, Paramount must exit its joint distribution business within 13 months following the transaction’s closure. Additionally, the company has agreed to refrain from any collaboration with Universal on film co-distribution for a period of ten years.
In the United Kingdom, regulators continue to scrutinize the merger and may consider intervening. In the United States, while federal officials have approved the merger, the ongoing lawsuit from twelve states presents an obstacle. A judge paused the merger for two weeks on July 20, with a hearing scheduled for August 3 to evaluate the need for a full trial.
Delays in closing the deal pose financial risks for Paramount. According to Bloomberg, if the merger does not finalize by the end of September, Paramount could incur costs of approximately $7 million per day until closure.
