Britain’s Paramount-Warner Deal Review: Commitments, Not Just a Veto?
By Paul Sandle
Government Intervention and Its Implications for the Paramount-Warner Deal
LONDON, July 2 (Reuters) - Britain's threat to intervene in the $110 billion Paramount-Warner deal could be less about blocking the transaction than extracting commitments on UK news, children's TV and investment, with the cost of any delay increasing the government's leverage.
Culture minister Lisa Nandy said on Tuesday she was leaning towards intervening in Paramount Skydance Corp's proposed takeover of Warner Bros Discovery on public-interest grounds centred on a possible reduction in media plurality.
Lawyers and media advisers said the public-interest case for intervention appeared limited. But the prospect of a review could encourage Paramount to offer voluntary commitments rather than risk delaying the deal and increasing costs.
Possible concessions could include commitments to preserve independent news provision and UK children's programming, as well as pledges to maintain or expand Warner's British production footprint, including Leavesden studios.
The deal has already been approved in a string of countries, with Kuwait, Austria and Australia the latest to give it the green light.
The U.S. Department of Justice has cleared the deal, but California, New York and other U.S. states are preparing a lawsuit to block it, sources have told Reuters.
Paramount has offered remedies to the European Commission ahead of its decision deadline of July 7.
Cost of Delay and Government Leverage
COST OF DELAY
Nandy said she was concerned the merger could reduce the range of voices available to British audiences, particularly in children's programming, news and streaming.
Paramount has agreed to pay Warner shareholders an additional 25 cents a share "ticking fee" for every quarter the deal remains unfinished after September 30, a provision that would cost it about $650 million in cash every three months.
That gives the government leverage because even a relatively limited public-interest review could delay completion and increase Paramount's costs.
Claire Enders, founder and chief executive of Enders Analysis, said the move had come as a surprise given that the grounds for intervention appeared relatively weak.
But she said Nandy, an ally of Andy Burnham, who is set to become Britain's next prime minister this month, appeared to be using the prospect of delay to secure commitments.
"Substance is never that important," she said. "What really matters is making big promises, way in advance of events. And this intervention seems to be structured in order to attain that."
Brinkmanship and Bluff in the Review Process
BRINKMANSHIP AND BLUFF
Britain's Competition and Markets Authority is already examining the deal under standard competition metrics such as market share. It will either clear it or refer it for a more detailed investigation by August 7.
Luke Stillman, a managing director at advisory firm Madison and Wall, said the competition and public-interest processes were separate.
"One is very quantitative, while the new inquiry would be on softer, more open to interpretation, grounds," he said.
Competition lawyer Ronan Scanlan, a partner at Steptoe, said Nandy's move, likely coordinated with Burnham, could signal a desire to appear tougher on global deals with a UK dimension.
He said there was an element of brinkmanship and bluff.
"Ultimately this is likely sabre rattling with a view to setting down a marker going forward for global deals and extracting some concessions, in this case around children's and general programming in the UK," he said.
Potential Concessions and Commitments
Paramount owns Britain's Channel 5 free-to-air broadcaster, while Warner owns CNN International.
In news, a simple concession could be a commitment to retain independent news producer ITN as Channel 5's provider rather than switching to CNN.
In children's TV, the deal combines Nickelodeon and Cartoon Network. Paramount could offer to maintain UK children's programming commitments.
Warner also owns major film and TV production facilities in Britain, including Leavesden studios, where "Barbie" and the Harry Potter movies were made. A commitment to retain or expand those operations could help address government concerns.
The companies have until July 6 to respond to Nandy.
"I suspect that this one-week turnaround is to basically punch them hard and see whether they cough up," Enders said.
Political Flux and the Future of the Deal
POLITICAL FLUX
Mark Kelly, chief executive of MKI Global Partners, said the merger was unfolding during a period of political flux in Britain, with Prime Minister Keir Starmer expected to be replaced by the more left-leaning Burnham on July 20.
Standing up to a major media company was likely to serve Nandy well politically, he said. She has already met Paramount boss David Ellison earlier this year to discuss the deal.
"One might presume that if Paramount were to approach her with the right stance over the summer, giving her sufficient ammunition to claim she has extracted concessions, (...) this can still be resolved reasonably quickly," he said.
Public-Interest Powers and Global Mergers
Whether or not the plurality concerns ultimately justify intervention, the case illustrates how governments can use public-interest powers to shape the terms of global mergers rather than simply block them.
Reporting and Editing
(Reporting by Paul Sandle, Additional reporting by Muvija M and Annousha Sakoui. Editing by Kate Holton and Mark Potter)
