Paramount Skydance‘s proposed acquisition of Warner Bros. Discovery hit its first official roadblock when a judge granted a temporary restraining order on the merger as part of a lawsuit brought by state attorneys general.
California District Judge Araceli Martínez-Olguín signed off on the order Monday after hearing arguments from both sides in an Oakland courtroom on Friday. The order puts a 14-day pause on anything moving forward with the merger.
Last week, a group of state attorneys general led by California’s Rob Bonta filed a lawsuit seeking to block the $110 billion acquisition due to antitrust concerns. The proposed deal would unite the storied film studios of Paramount and Warner Bros, the CBS broadcast network, a sprawling portfolio of pay TV networks that includes CNN, TNT, MTV and BET, and streaming services Paramount+ and HBO Max, under one roof.
In a statement Monday, a Paramount spokesperson said the company is “confident the evidence will demonstrate that the State AGs’ antitrust arguments are without merit as their alleged markets and claims of anticompetitive effects are without any basis in modern market realities.”
“This merger is lawful, pro-competitive, and will benefit consumers, creators, workers, and the entertainment industry. We will continue to vigorously defend the transaction and will look forward to the hearings on the substance of the State AGs’ action,” according to the statement.
Warner Bros. declined to comment.
The lawsuit said the proposed deal would violate the Clayton Antitrust Act — a more than 100-year-old law that prohibits anticompetitive mergers and acquisitions. The lawsuit was brought by a group of states that also includes Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington.
In Monday’s order, Martínez-Olguín said the coalition of state attorneys general presented “compelling evidence that the combined firm resulting from the transaction will possess substantial market share in the wide-release theatrical distribution market.”
Paramount’s lead trial counsel, Jeffrey Kessler, said on CNBC last week that the TRO was filed after Paramount indicated its intention was to close the deal as early as July 22, when the company expects to have all regulatory clearances.
During Friday’s hearing, Paramount attorneys offered to delay the deal closing until mid-August to sidestep a temporary restraining order.
In Monday’s statement, Paramount said it was “grateful for the court’s swift order,” adding that similar to its offer to delay the deal during Friday’s hearing, the order “preserves the status quo while the Court considers the antitrust issues presented.”
Still, the states could seek another temporary restraining order after the 14 days, or a preliminary injunction, which would further delay the deal.
Another proposed media deal — the $6.2 billion tie-up of broadcast station group owners Nexstar Media Group and Tegna — has been put on pause following a similar lawsuit and preliminary injunction that was granted by a U.S. court. A trial for the lawsuit, which is also being led by Bonta, is set to begin in mid-2027.
The Paramount-WBD transaction has been under review by the European Union and the U.K., which provided a new provisional deadline of July 22.
The Antitrust Division of the U.S. Department of Justice signed off on the tie-up in June, clearing it of federal concerns. It has also won approval from several global jurisdictions.
Paramount has said it’s on track to close the deal by the end of September.
If the transaction were to be delayed beyond then, Paramount could face additional costs, namely a so-called ticking fee that kicks in if it’s not closed after Sept. 30. The fee would be an additional 25 cents paid to WBD shareholders per quarter until closing — which would equal about $650 million in cash value per quarter.
Paramount also agreed to a $7 billion breakup fee if the deal doesn’t move forward due to regulatory concerns.
Bonta called the merger unlawful and said it would “lead to higher prices, lower quality, and less content for film and television, harming movie theaters, basic cable distributors, and ultimately, audiences on every sofa and movie theater seat in the U.S.”
The states that brought the lawsuit against the deal said they believe that the merged entity would control nearly one-third of films and nearly a third of basic cable TV programming.
Paramount has defended the deal as “pro-competitive.”
In court papers filed Thursday, Paramount said the temporary restraining order “presents one of the weakest merger challenges in modern antitrust history.”
The company said the deal would “produce more high-quality content for consumers; it will incentivize investment in job-creating film production; it will stabilize basic cable television (which is gravely threatened by cord cutting); and it will increase the output of theatrical releases in a challenged entertainment landscape.”
— CNBC’s Sarah Whitten and Stephen Desaulniers contributed to this article.
Correction: Paramount’s lead trial counsel, Jeffrey Kessler, spoke on CNBC last week. An earlier version misstated the time element. Paramount agreed to a $7 billion breakup fee if the deal doesn’t move forward due to regulatory concerns. An earlier version mischaracterized the fee.
