The battle for control of Warner Bros Discovery Inc (NASDAQ:WBD, XETRA:J5A) has narrowed into a bruising contest between Paramount and Netflix Inc (NASDAQ:NFLX, XETRA:NFC).
And the intensity of that fight has made Tencent’s continued involvement all but untenable. Paramount has now confirmed that the Chinese tech group has pulled its planned $1 billion financing commitment from the offer, a move that also reflects the extra scrutiny foreign investors can attract in US media deals.
In a revised filing to the Securities and Exchange Commission, Paramount said Tencent’s participation had raised the risk of a review by the Committee on Foreign Investment in the United States.
Although CFIUS or Federal Communications Commission approval was not a formal condition of the bid, management acknowledged that a “non-US equity financing source” could add complications.
The sovereign wealth funds of Saudi Arabia, Abu Dhabi and Qatar, together providing $24 billion in backing, have already agreed to forgo any management rights at Warner Bros to sidestep similar concerns.
Paramount this week launched a hostile $77.9 billion offer for Warner Bros Discovery, setting up a head-to-head with Netflix for the owner of HBO, CNN and Warner Bros studios.
US authorities have taken a tougher line on foreign investment under both the Biden and Trump administrations, with CFIUS frequently examining deals that touch strategically sensitive sectors.
Tencent, one of China’s biggest entertainment and social media groups, has long rejected US assertions that it has links to China’s military.
The company owns Riot Games, has relationships with major American entertainment brands and runs WeChat, China’s dominant messaging and payments platform. It is valued at more than $700 billion on the Hong Kong exchange.