Tencent Withdraws $1 Billion Backing from Paramount's Warner Bros. Discovery Bid Amid U.S. National Security Concerns

Tencent Holdings, the prominent Chinese technology and media conglomerate, has retracted its financial commitment from Paramount Skydance Corp.'s acquisition attempt of Warner Bros. Discovery, as disclosed in an amended filing with the U.S. Securities and Exchange Commission (SEC). The filing confirmed that the Chinese company withdrew its $1 billion financing pledge for the proposed takeover. Paramount indicated that Tencent’s involvement had been a source of concern because, as a non-U.S. equity financing source, it raised the potential for the bid to be subjected to review by the Committee on Foreign Investment in the United States (CFIUS), even though regulatory approvals from CFIUS or the Federal Communications Commission were not stipulations of the offer.

The SEC document, dated Monday, further noted that sovereign wealth funds from Saudi Arabia, Abu Dhabi, and Qatar, which are providing $24 billion for Paramount's bid, agreed to relinquish any rights to participate in the management of Warner Bros. Discovery to mitigate the risk of heightened scrutiny. Paramount initiated a competitive, unsolicited takeover offer valued at $77.9 billion for Warner Bros. Discovery, positioning itself against Netflix, which is also vying to acquire the company that owns assets including HBO, CNN, and a major film studio. Significant transactions involving foreign entities are frequently subject to national security assessments by CFIUS, a U.S. government body headed by the Treasury Secretary that can mandate changes to ownership structures or complete divestment from U.S. operations based on national security concerns. Both the Biden and Trump administrations have pursued measures to expand the Treasury Department's authority in light of growing national security concerns related to foreign investment.

Tencent, which operates the globally popular WeChat messaging and payments service and is the world's largest equity investor in online gaming, has been named by the U.S. Defense Department on a list of companies alleged to have ties to the Chinese military, an accusation the Hong Kong-listed company denies. Based in Shenzhen, Tencent also owns League of Legends developer Riot Games and maintains partnerships with other significant U.S. entertainment brands, including a streaming agreement with the National Basketball Association.