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Chinese gaming and social media giant Tencent has been withdrawn from holdings of great quality Skydance Corp bid to buy warner brothers Discovery, according to an amended filing by Paramount of its acquisition bid with the U.S. Securities and Exchange Commission.
The filing seen on Wednesday shows that the Chinese company has abandoned its $1 billion financing commitment for the takeover bid.
Paramount said the Chinese company’s participation in the bid raised concerns that, because it would be a “non-U.S. equity financing source”, its bid could be subject to review by the Committee on Foreign Investment in the United States, known as CFIUS. This was even though approval by CFIUS or the Federal Communications Commission was not a condition of the bid.
Monday’s SEC filing said the foreign sovereign wealth funds of Saudi Arabia, Abu Dhabi and Qatar, which are providing $24 billion for Paramount’s bid, had agreed to waive the right to participate in the management of Warner Bros. to avoid additional scrutiny.
On Monday, Paramount launched a $77.9 billion hostile takeover offer for Warner Bros. Discovery, competing with rival bidder Netflix to buy the company behind HBO, CNN and a renowned movie studio.
Large deals involving foreign companies are sometimes subject to national security review 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 completely divest from the US.
under former president Joe Biden Along with President Donald Trump, the Treasury Department has sought to strengthen its powers as national security concerns related to foreign investment have grown.
Tencent is one of dozens of Chinese companies added by the US Defense Department to a list of companies it says have ties to China’s military. Tencent, whose shares are listed in Hong Kong, denies this.
Based in the southern technology and financial hub of Shenzhen, Tencent owns League of Legends developer Riot Games and has ties to other big US 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 leading entertainment and social media company, which operates the popular WeChat messaging and payments service. China and with Chinese immigrants abroad. According to the Stock Exchange of Hong Kong, Tencent has a market capitalization of more than $700 billion.
There was no immediate comment from Tencent.