BANGKOK (AP) — Paramount Skydance says the Chinese gaming and social media giant Tencent Holdings withdrew from its bid to buy Warner Bros Discovery to avert a possible national security review.
Paramount’s revised filing with the U.S. Securities and Exchange Commission of its takeover bid said the Chinese company had dropped its $1 billion financing commitment out of concern, since it would be a “non-U.S. equity financing source,” that its bid might be subject to a review by the Committee on Foreign Investment in the United States, known as CFIUS. That was even though approval by CFIUS or by the Federal Communications Commission was not a condition of the bid.
The SEC filing, dated Monday, said that foreign sovereign wealth funds of Saudi Arabia, Abu Dhabi and Qatar, which are providing $24 billion for Paramount’s bid, had agreed to give up a right to participate in Warner Bros’ management to avoid the additional scrutiny.
On Monday, Paramount launched a hostile $77.9 billion takeover offer for Warner Bros. Discovery, competing with rival bidder Netflix to buy the company behind HBO, CNN and a famed movie studio.
Big deals that involve foreign companies are sometimes subject to national security reviews by CFIUS, a U.S. government group chaired by the Treasury Secretary that studies mergers for national-security reasons. It has the power to force companies to change ownership structures or divest completely from the U.S.
Under former President Joe Biden as well as President Donald Trump, the Treasury Department has sought to strengthen its powers as national security concerns related to foreign investment have increased.
Tencent is among dozens of Chinese companies that the U.S. Defense Department has included in a list of companies it said have ties to China’s military. Tencent, whose shares are listed in Hong Kong, denies that.
Based in the southern technology and financial hub of Shenzhen, Tencent owns the League of Legends developer Riot Games and has ties with other big U.S. entertainment brands. It also has a streaming deal with the National Basketball Association.
It is the world’s largest equity investor in online games and a major entertainment and social media company, operating the WeChat messaging and payments service in popular China and with Chinese emigrants abroad. Tencent has a market capitalization of over $700 billion, according to Hong Kong’s stock exchange.
There was no immediate comment from Tencent.