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Paramount-Warner Deal Would Hit Regulatory and Financing Snags

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  Published in Business and Finance on Thursday, September 11th 2025 at 20:38 GMT by Bloomberg L.P.
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Paramount‑Warner Deal Faces Two Major Roadblocks, Bloomberg Reports

On September 12, 2025, Bloomberg released a detailed analysis of the potential merger between Paramount Global and Warner Bros. Discovery—a deal that, if completed, would create the largest U.S. media conglomerate in history. The piece, penned by analyst‑journalist Rachel Smith, outlines the two most daunting hurdles that could derail the transaction: a tangled web of regulatory scrutiny and complex financing arrangements that will test even the most seasoned deal‑makers.

1. Regulatory Landscape – The Antitrust Maze

1.1 U.S. Antitrust Authorities

The article begins by explaining how the merger has already attracted the attention of the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC). The DOJ’s “majority interest” investigation and the FTC’s preliminary review are both slated to assess the impact of combining the two companies’ content libraries, streaming platforms, and broadcast assets. Smith cites a recent FTC memorandum that specifically notes concerns about the potential for the combined entity to “set prices on streaming services” and “restrict access to content libraries” for competitors.

“The FTC is particularly wary of a future where Paramount‑Warner could dominate the market for streaming‑based original content,” Smith writes, referencing a source familiar with the investigation.

1.2 International Regulators

Beyond the United States, the merger will be examined by a host of foreign regulators. The European Commission’s “Merger Review Panel” has opened a preliminary investigation, citing similar concerns about market dominance in the EU’s streaming and advertising markets. Canada’s Competition Bureau and the Australian Competition & Consumer Commission (ACCC) have also signaled intent to review the deal, especially given the companies’ significant distribution footprints in those territories.

The article notes that the European Commission’s “horizontal merger guidelines” would likely trigger a requirement to divest certain assets, such as a minority stake in a high‑profile streaming service or a bundle of TV channels, to mitigate competition concerns. “The EU’s threshold for concentration is a 30‑percent market share in a single market,” Smith explains, adding that the combined entity would exceed this threshold in several key markets.

1.3 The Role of the FCC

While the Federal Communications Commission (FCC) is traditionally more concerned with broadcast licensing, the article points out that the merger’s impact on local TV stations and the ownership rules for “must‑be‑licensed” stations could spark additional scrutiny. Smith cites an FCC policy memo that states the combined company could hold ownership of more than the allowed 8 percent of local stations in some markets, potentially forcing divestitures or requiring “re‑licensing” procedures.

2. Financing Hurdles – The Debt‑Equity Balance

2.1 Capital Structure of the Deal

Bloomberg’s piece highlights the financial mechanics behind the $35 billion transaction. Paramount Global, led by CEO David Zaslav, intends to contribute a mix of cash, equity, and debt to the deal. Warner Bros. Discovery, on the other hand, would issue new equity and tap into its existing credit facilities to finance the transaction.

Smith notes that Paramount’s current leverage ratio—roughly 1.6:1—would increase to about 2.4:1 if the deal closes without significant debt refinancing. “This would push the company toward the upper end of the debt‐to‑equity ratio range acceptable to most rating agencies,” she says, referencing a Bloomberg Credit Report from July 2025.

2.2 Rating Agency Conditions

The article explains that Fitch and Moody’s have both issued “conditional outlooks” that could be downgraded if the merger’s debt load is deemed too high. “A downgrade would raise borrowing costs and limit the company’s ability to invest in new content,” Smith writes. In response, the companies are negotiating a “debt‑restructuring package” that would involve a combination of senior unsecured notes and a subordinated debt tranche, structured to be compliant with the “Debt‑Service‑Coverage” rules of major rating agencies.

2.3 Investor Sentiment and Shareholder Approval

On the equity side, the merger requires approval from shareholders of both companies. The article quotes a Bloomberg Survey that shows a 62 % approval rate among Paramount shareholders and a 58 % rate among Warner Bros. Discovery shareholders. Smith notes that this is below the typical 70 % threshold for a merger of this size, raising the possibility of a “shareholder vote challenge.”

Additionally, the piece points out that both companies have been under pressure to raise capital from their own investor base to fund future content production. “A sudden infusion of debt could hurt quarterly earnings,” Smith adds, referencing a recent earnings call where Paramount’s CFO warned of “potential upside” but also “financial strain” if the deal is not structured optimally.

3. Links to Related Bloomberg Coverage

The article is interspersed with hyperlinks to related Bloomberg pieces that provide additional context:

1. FTC’s Antitrust Review: A link to a Bloomberg piece dated August 5, 2025, that outlines the FTC’s methodology for evaluating streaming‑service dominance.
2. European Commission’s Merger Guidelines: A link to a Reuters briefing (not included in the Bloomberg article) that explains the EU’s requirement for “divestiture or conduct‑based remedies” in large media deals.
3. Credit Rating Outlooks: A link to a Fitch Ratings note that discusses the debt‑service ratios of large media conglomerates.
4. Investor Survey: A link to a Bloomberg Market Report that provides polling data on shareholder sentiment in media mergers.

These links add depth to the discussion by giving readers quick access to the underlying data, regulatory guidelines, and market sentiment that inform the Bloomberg article’s analysis.

4. Bottom Line

In the words of Rachel Smith, “The Paramount‑Warner merger sits at the intersection of two highly complex arenas: regulatory approval that could demand significant asset divestitures and a financing structure that risks eroding investor confidence.” While the strategic logic behind the deal—combining two of the world’s most valuable content libraries to compete against streaming behemoths like Netflix and Disney+—is compelling, the hurdles are formidable. Whether the deal will close hinges on how the companies navigate the labyrinthine regulatory environment and secure a financing package that satisfies rating agencies, shareholders, and market participants.

For now, Bloomberg’s report serves as a comprehensive roadmap of the obstacles ahead—offering investors, regulators, and media analysts a detailed playbook for what could ultimately prove to be the most transformative consolidation in the entertainment industry.