Shares of Paramount (PSKY) advanced 2.5% on Wednesday following the European Commission’s conditional approval of its $110 billion purchase of Warner Bros. Discovery (WBD).
Paramount Skydance Corporation Class B Common Stock, PSKY
Brussels’ executive body stated that its approval hinges on “full compliance with the commitments offered by Paramount.”
Under the terms of European approval, Paramount must divest its ownership position in United International Pictures, a film distribution joint venture operating across Europe. The company has a 13-month window following deal completion to finalize this divestiture.
Additionally, Paramount pledged not to pursue any co-distribution arrangements with NBC Universal for theatrical releases in Europe over the next ten years. The company will also maintain Warner Bros.’ current theatrical distribution structure in the region rather than consolidating operations.
Competition authorities in the EU indicated these commitments “fully address the competition concerns identified by the commission by ensuring that the films of the merged entity will not be distributed jointly with those of Universal or Disney.”
Warner Bros. Discovery shares showed minimal reaction to the announcement, closing approximately flat for the session.
The Department of Justice concluded its review in June, choosing not to contest the merger or require any remedies. Federal regulators gave it a complete pass.
However, the situation became more complex when California joined 11 additional states in filing litigation on July 13 aimed at blocking the combination. Their lawsuit contends that merging two of Hollywood’s five major studios would damage competition in theatrical distribution and cable television markets.
On Monday, a federal judge in California granted a 14-day temporary restraining order, halting the companies from finalizing the transaction for the time being.
This represents a significant obstacle. The original timeline called for closing the deal this week.
Should the transaction fail to close by September’s end, Paramount will incur financial penalties. The agreement requires the company to pay Warner Bros. shareholders approximately $7 million daily in late fees until completion.
Those costs escalate quickly.
Paramount initially announced the acquisition agreement in February, prevailing over Netflix in a competitive bidding situation. CEO David Ellison negotiated and secured the deal.
The transaction carries an $81 billion valuation for equity, reaching $110 billion when debt obligations are included.
European regulatory approval represented one of the last significant barriers. With Brussels now satisfied, attention returns to the California federal courthouse.
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