Paramount Skydance Corp. is prepared — if necessary — to divest some children’s TV network assets to help win European Union approval of its $110 billion bid for Warner Bros. Discovery Inc.

While Paramount is hoping to avoid selling off anything, it’s open to sacrificing kids channels if the EU raises red flags over overlaps that pose a threat to competition, according to people familiar with the matter who spoke under condition of anonymity.

They added that the company is yet to make a decision on if, or when, it would submit formal remedies as the clock ticks toward the EU’s initial July 7 deadline to clear the blockbuster deal or open an-depth review.

Scrutiny from the Brussels-based European Commission is one of the last hurdles Paramount Chief Executive Officer David Ellison must overcome after outmaneuvering rival suitor Netflix Inc. with multiple bids over more than five months, visits to Washington, meetings with shareholders and President Donald Trump and the personal backing of his billionaire father Larry Ellison. The transaction, if approved by global regulators, would give the Ellison family control of one of the most powerful media empires in the world.

The takeover unites two Hollywood studios behind legendary films from "Casablanca" and "Harry Potter" to "Mission: Impossible"; two major news networks in CNN and CBS; the streaming powerhouse HBO Max and dozens of cable networks. It also brings together Paramount’s Nickelodeon and Warner Bros Discovery’s Cartoon Network, two of the best-known children’s television brands in Europe — a market where about half of all kids channels are U.S.-owned.

“It’s certainly likely that the commission will scrutinize overlaps between Paramount and Warner Bros. Discovery in the wholesale supply of children’s television channels” across the region, said Jennifer Rie, a Bloomberg Intelligence analyst. “Concerns would be raised if combined market shares exceed 40% in any country.”

Kids content isn’t the only potential pitfall in the EU probe. Cinemas have called for commitments on exclusive theatrical windows, the period after a film’s cinema release when it can only be seen in theaters, before appearing on streaming services.

Commission officials have recently approached movie theaters for their views on the likely impact of the merger on their business, according to other people familiar with the matter who asked not to be named because the process isn’t public.

EU merger rules give buyers only a short window of opportunity to allay potential competition concerns — if any are flagged — during an initial phase 1 probe. In this case, remedies would have to be filed by the start of July to give officials a chance to test them out during a brief extension period.

The commission could then either clear the tie-up or open a so-called phase 2 probe, delaying a decision by about three months, though deadlines can be extended.

EU watchdogs typically demand remedies to solve competition concerns during in-depth reviews but sometimes also decide to give their unconditional approval if initial concerns are shown to be unfounded.

Paramount declined to comment on the specifics of the EU probe, and reiterated that “it’s been engaged with all regulatory and law enforcement bodies in a constructive and transparent manner and will continue to do so.” The commission didn’t comment beyond confirming the EU’s deadline for a decision.

Paramount bosses are targeting a closing date in the third quarter of this year, with a rapid review process potentially opening the door for a quicker closure date.

Elsewhere in Europe, the U.K.’s Competition and Markets Authority is poised to open an initial investigation, and has come under pressure from public-interest groups, unions and film-industry groups to take a tough stance.

For their part, U.S. antitrust regulators appear ready to approve the takeover, Semafor reported late last month. But a group of states led by California Attorney General Rob Bonta have also been investigating, and could file a lawsuit to block the deal as soon as this month.

Middle East billions

While most eyes are on the EU’s traditional merger review, Paramount’s purchase must also survive the bloc’s recently adopted Foreign Subsidies Regulation. The law is aimed at preventing firms bankrolled by sovereign states — such as petrol-rich Gulf nations and China — from distorting fair competition in the 27-nation EU.

A trio of Middle East funds agreed to provide about $24 billion of equity finance to help bankroll Paramount’s bid. This includes Saudi Arabia’s Public Investment Fund, the Qatar Investment Authority, and the lesser-known Abu Dhabi firm L’Imad Holding Co.

The sovereign funds would receive newly issued non-voting Class B shares of Paramount, meaning they will have limited governance influence over the combined entity — something that could play in the deal’s favor as part of the upcoming probe.

The funds are overseen by wealthy Gulf states that have long supplied large amounts of capital to global buyout firms. One example is Apollo Global Management Inc., which is among firms providing multibillion-dollar financing for the Paramount offer. Abu Dhabi’s Mubadala Investment Co. has a long-standing relationship with Apollo, and the PIF’s venture arm has invested in funds run by the U.S. firm.

People familiar with the matter said Paramount’s formal notification to the EU under the FSR rules is imminent, but that no serious risks are foreseen. Should the commission take a different view, it could eventually open a full-scale probe, with Paramount potentially having to issue remedies to offset any concerns.

The Middle Eastern financing has also sparked concerns in the U.S., where a group of Democratic senators has urged the Federal Communications Commission to conduct “a rigorous and thorough review of the foreign investment in Paramount,” according to a letter to the agency’s Chair Brendan Carr.

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(With assistance from Adveith Nair, Upmanyu Trivedi, Josh Sisco and Christopher Palmeri.)

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