FCC clears Gulf sovereign funds to hold nearly half of Paramount Skydance

The Federal Communications Commission's Media Bureau has approved a request from Paramount Skydance Corp. to let sovereign wealth funds from Saudi Arabia, Qatar and Abu Dhabi hold nearly half the equity of a combined Paramount-Warner Bros. Discovery, waiving a decades-old cap on foreign ownership of U.S. broadcast licensees. The order, released Sept. 17 and reported the following day by the Associated Press, clears one of the last major regulatory hurdles standing between David Ellison's Paramount and its roughly $110 billion acquisition of Warner Bros. Discovery — though the deal itself remains frozen by an unrelated antitrust fight in federal court.

The ruling does not touch voting control. Class A voting shares stay entirely with the Ellison family and RedBird Capital Partners, who will hold 100 percent of governance rights in the merged company. What it does is let non-voting, passive foreign capital flow in at a scale that was previously off-limits without individual, case-by-case sign-off.

The numbers behind the waiver

Paramount had asked the FCC to waive the standard 25 percent statutory limit on indirect foreign ownership of a U.S. broadcast company and to pre-clear individual investors to grow their stakes without coming back for fresh approval each time. The bureau granted both requests, authorizing up to 100 percent aggregate indirect foreign equity ownership in Paramount, subject to national-security conditions. According to a detailed accounting of the order, the specific stakes approved are:

• Saudi Arabia's Public Investment Fund — 15.1 percent indirect equity
• Entities tied to Abu Dhabi's L'Imad Holding — 12.8 percent
• QIA TMT Holding and the Qatar Investment Authority — 10.6 percent

Those three Gulf funds together account for roughly 38.5 percent of Paramount's equity, part of a combined $24 billion commitment to the transaction; total foreign ownership of the merged company, including other non-U.S. holders, is expected to reach 49.5 percent. Each fund also received advance clearance to grow its position to 20 percent without a further FCC ruling. The approval was conditioned on a Sept. 4 letter of agreement with federal national-security officials barring the investors from any governance rights, content influence, management input or access to non-public data on U.S. persons.

A deal that has been fighting on two fronts since February

Paramount Skydance signed its merger agreement with Warner Bros. Discovery in late February, after WBD's board decided Paramount's offer — since raised to roughly $81 billion in equity, about $110 billion including debt — was superior to a prior agreement with Netflix. Paramount paid Netflix a $2.8 billion breakup fee to clear the way. Warner Bros. Discovery shareholders approved the merger on April 23, and the deal has since cleared antitrust review in more than 65 countries, including Hart-Scott-Rodino clearance from the U.S. Justice Department, according to the company's own SEC disclosures on the transaction's regulatory timeline.

But foreign-ownership approval was never the deal's biggest obstacle. That distinction belongs to a lawsuit filed by a coalition of a dozen state attorneys general, led by California's Rob Bonta, arguing the combination of two of Hollywood's five major film studios and two of its five major cable programmers would leave the merged company controlling close to a third of theatrical releases and basic-cable programming in the country. A federal judge in the Northern District of California has already halted the deal from closing while the case proceeds; a trial is scheduled for March. The Writers Guild of America joined the states as a plaintiff.

Dissent inside the agency, and outside it

The foreign-ownership approval was a staff-level action by the Media Bureau's video division, not a vote of the full five-member commission. David Brown, the bureau's chief of that division, concluded that giving Paramount broader access to capital would strengthen the broadcast industry and was therefore "in the public interest," and that the structure persuaded staff the foreign investors "will not be able to wield any influence, let alone control" over the company's television stations.

Democratic Commissioner Anna Gomez took the unusual step of publicly criticizing a decision made below her level, calling out both its substance and the process that produced it.

"The FCC just let some of the most repressive governments in the world indirectly control nearly all of a combined Paramount-Warner Bros. An investment this large in one of America's biggest media companies doesn't just buy equity; it secures influence over what gets said and what gets made."

Gomez separately objected that the order was "a staff-level decision, with no public vote and no accountability." A group of Senate Democrats, including a letter sent to FCC Chairman Brendan Carr earlier this year, had already pressed the agency over allowing Gulf sovereign funds — several with track records the senators called troubling on press freedom and human rights — to take large stakes in a company that owns CBS News and more than two dozen local television stations. The critique resurfaced Thursday in commentary arguing that the FCC's public-interest finding sidestepped the investors' governments' human-rights records entirely in favor of the deal's capital benefits.

Markets shrug, litigation grinds on

Investors read the FCC order as removing one obstacle while two much bigger ones — the states' antitrust case and the cost of delay — remain squarely in place. Paramount Skydance shares actually slipped roughly 3 percent on Sept. 18, closing lower as attention shifted to the antitrust case rather than the regulatory win. A contractual "ticking fee" that Paramount owes Warner Bros. Discovery shareholders — reported at roughly $7 million a day — begins accruing after Oct. 1, adding real cost to every month the merger sits in limbo.

Settlement talks between Paramount and Bonta's office collapsed in acrimony in late August, when the attorney general accused the company of leaking confidential negotiating details to the press; Paramount denied it. By the evening of Sept. 18, however, both sides told reporters the discussions had turned "constructive" again, and a court-ordered settlement conference has been set for Oct. 14-15, according to a wire report published that evening. Neither side has signaled how close they are to an actual resolution, and barring a settlement, the case is still headed for trial in March — meaning the FCC's blessing on foreign financing may end up mattering only if Paramount and the states find a way to resolve their dispute long before then.