The planned mega merger of Paramount Skydance Corp. and Warner Bros. Discovery Inc., which would cost $110 billion and threaten to change the landscape of Hollywood, has run into a major legal hurdle. The companies were on the brink of closing the deal this week, but now risk putting the deal on hold for months at a cost that could quickly climb to billions of dollars.
Court pauses Paramount and Warner Bros deal
On Monday, a federal judge in the US granted a request from states challenging the deal to pause the tie-up for two weeks, saying it “likely” violates antitrust law. But this could only be the beginning of a long delay. In early August, US District Judge Araceli Martínez-Olguín will hold a hearing in Oakland, California, to determine whether the acquisition should be put on ice pending the outcome of a full trial. Twelve US states, including California, are opposing the deal and want a trial in April.
In ordering the brief pause, Martínez-Olguín said the states’ case is in the public interest, is likely to ultimately succeed and would be harmed if the deal closed sooner. The judge must make the same determination in two weeks, meaning the odds are high that the states will secure a longer delay. Paramount is expected to appeal if it loses that ruling, but a decision wouldn’t likely come until the end of the year or later.
Paramount and Warner Bros were earlier hoping to close as soon as Wednesday, when European regulators are expected to clear the deal.
Delays could see costs balloon up
{{/usCountry}}Paramount and Warner Bros were earlier hoping to close as soon as Wednesday, when European regulators are expected to clear the deal.
Delays could see costs balloon up
{{/usCountry}}But now, if the deal does not close by September, Paramount must pay about $7 million per day in late fees to Warner Bros.’ shareholders. That means if the deal is delayed on account of the trial in April, it will be a long wait for the company. With the daily fee, an April trial could total well over $1 billion in extra costs to Paramount, Bloomberg reported.
The Writers Guild of America is also challenging the transaction, arguing that it would harm competition in the markets for film and television writing.
Paramount inked the deal in February after beating back Netflix following a heated bidding war. The takeover unites two iconic Hollywood studios behind legendary films from Casablanca and Harry Potter to Mission: Impossible. It also brings under Paramount’s control two major news networks — CNN and CBS — the streaming powerhouse HBO Max, and dozens of cable networks.