Tencent Stake in Skydance-Paramount Draws Lawmaker Scrutiny

(Bloomberg) — CBS owner Paramount Global’s merger with film and TV producer Skydance Media should be reviewed by federal authorities because of the participation of China’s Tencent Holdings Ltd., which was recently added to a US military blacklist, a key member of Congress said.

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John Moolenaar, chairman of the House China Select Committee, said Wednesday in a statement that the merger should be reviewed by the Treasury Department’s Committee on Foreign Investment in the US.

“We’ve heard from multiple Hollywood executives about rampant self-censorship designed to curry favor with the Chinese Communist Party,” the Michigan Republican said. “Given that just this month, the Department of Defense designated Tencent as a Chinese military company, CFIUS should closely scrutinize the proposed merger to ensure the Chinese Communist Party is not further solidifying its hold on the American entertainment industry.”

Tencent, a technology and entertainment company, is an investor in Skydance. It will have a less-than 5% stake in the merged Paramount-Skydance and will be a passive, nonvoting investor, according to a person with knowledge of the deal who asked not to be identified.

The merger is subject to approval by the Federal Communications Commission, which must OK the transfer of Paramount’s broadcast licenses. The company owns the CBS network, several television stations and well-known cable channels like MTV.

Speaking to reporters on Wednesday, FCC member Brendan Carr didn’t rule out a national security review.

“We’re going to look at all the issues that have been raised,” said Carr, who has been nominated to be FCC chairman by President-elect Donald Trump. “At this point, sort of nothing is off the table.”

Skydance declined to comment. Neither Paramount nor Tencent immediately responded to emails seeking comment.

The China Committee’s interest in the deal is one of the first signals the parties could face headwinds from other parts of the US government.

Carr is a known China hawk and has criticized Paramount’s CBS over perceived media bias. He suggested CBS’ handling of a Kamala Harris interview could play into how the transaction is evaluated.

Tencent’s interest has also been raised in the FCC’s public comment docket. The Center for American Rights, a media watchdog group that previously filed an FCC complaint about the editing of the Harris CBS interview, told the agency on Jan. 13 that it should take note of Tencent’s status as a blacklisted company.

“The company’s inclusion should be a red flag to this commission,” the center wrote. “The commission is duty-bound to do its due diligence when a founding investor in New Paramount is a ‘Chinese military company.’”

The center called on the FCC to consult with CFIUS, or another body, like the Justice Department’s Team Telecom coalition. The FCC often informally refers deals to Team Telecom for review and also respects CFIUS’ input, the filing said.

Investor Mario Gabelli is separately asking a Delaware court to force the companies to divulge more details about the terms of the merger.

Analysts have predicted the deal will gain FCC approval, as Paramount’s broadcast license holdings don’t meet the agency’s media-ownership threshold for scrutiny.

(Updates with FCC comments in seventh paragraph.)