CBS, TNT Sports Parents Face New Merger Scrutiny by Lawmakers

The proposed $110 billion merger of Paramount and Warner Bros. Discovery always was going to face a rocky road toward regulatory approval, but a group of Democratic lawmakers has raised a new set of concerns.

Six U.S. senators sent a letter Wednesday to Federal Communications Commission chairman Brendan Carr, arguing that the significant amount of foreign money involved in the planned WBD takeover by Paramount, the CBS Sports parent company, “raises national security alarms.”

Paramount previously said in an FCC filing that 49.5% of the merged entity of Paramount and WBD, the parent company of TNT Sports, would be owned by foreign investors. In addition, about 38.5% of that equity would be owned by sovereign wealth funds of Abu Dhabi, Qatar, and Saudi Arabia. 

“The scale, concentration, and scope of this proposal raise serious questions,” wrote the senators. Helping lead the group of six lawmakers on this front is Sen. Maria Cantwell (D., Wash.), the top Democrat on the Senate Commerce Committee, which oversees the FCC. “Foreign governments hostile to a free and independent press could exert unprecedented influence over a media conglomerate vital to American journalism and culture.”

Current federal statutes prohibit more than indirect foreign ownership of TV or radio stations exceeding 25%, and the Paramount deal seeks an exception to that statutory cap.

“Given the well-documented hostility against a free press in their own countries, we have serious doubts that paving the way for these anti-democratic governments to own between 49.5% and 100% of an American media empire serves the ‘public interest,’” the senators wrote.

While issues relating to national security and press freedoms are at the core of this latest exchange, sports media also looms large in the deal, should it happen. A combined operation of CBS Sports and TNT Sports would have rights in nearly every major U.S. pro league, aside from the NBA, and have few rivals anywhere in the industry.

The FCC has not commented specifically on the letter, but Carr previously acknowledged that the proposed merger has “some foreign investment or foreign dollars that are involved in being invested in CBS to complete the purchase. And so we are running regular [regulatory] course process on that. So we put out a public notice to seek comment on that foreign investment.”

Deal Flow

Time will be of the essence in this situation as Paramount intends to close the agreement no later than the end of September, and perhaps as soon as mid-July. While the federal review process continues, there are also parallel inquiries happening on state and international levels, with regulators in California and the European Union signaling concerns of their own. 

Shareholders have already approved the deal, but WBD investors also recently rebuked a pay plan for WBD CEO David Zaslav, calling for as much as $886 million in golden-parachute compensation related to the Paramount merger. 
While the regulatory process continues, WBD is leaning heavily into its sports programming, including rights in MLB, the French Open, NHL, and college sports.