Paramount and Warner Bros. merger hit with temporary restraining order

Paramount Skydance‘s recommended purchase Warner Bros. Discovery The merger hit its first official hurdle when a judge issued a temporary restraining order on the merger as part of a lawsuit filed by state attorneys general.

California District Judge Araceli Martínez-Olguín signed the order Monday after hearing arguments from both sides in an Oakland courtroom on Friday. The order imposes a 14-day pause on any prospective merger-related activity.

Last week, a group of state attorneys general from California, led by Rob Bonta, filed the lawsuit. a case It is trying to block the $110 billion acquisition due to antitrust concerns. The proposed deal would bring together the established film studios of Paramount and Warner Bros., the CBS broadcast network, a broad portfolio of pay-TV networks that includes CNN, TNT, MTV and BET, and the Paramount+ and HBO Max streaming services under one roof.

In a statement Monday, a Paramount spokesman said the company was “confident that the State AGs will demonstrate that the antitrust allegations are unfounded because the alleged abuses and allegations of anticompetitive effects have no basis in modern market realities.”

“This merger is legal, pro-competitive, and will benefit consumers, creators, workers, and the entertainment industry. We will continue to vigorously defend the transaction and look forward to hearings on the merits of the State AGs’ action,” according to the statement.

Warner Bros. He refused to comment.

The proposed deal would violate the contract, the suit said. Clayton Antitrust Act — a more than 100-year-old law that prohibits anticompetitive mergers and acquisitions. The lawsuit was filed by a group of states, including 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 had presented “compelling evidence that the combined firm resulting from the transaction will have a significant market share in the broad theatrical distribution market.”

The TRO was filed after Paramount indicated it intended to close the deal as early as July 22, when the company expects to receive all regulatory approvals, Jeffrey Kessler, Paramount’s lead trial counsel, said on CNBC earlier this week.

At Friday’s hearing, Paramount lawyers offered to delay the closing of the deal until mid-August to avoid a temporary restraining order.

In its statement on Monday, Paramount said it was “grateful for the court’s swift decision,” adding that, similar to its offer to delay the settlement at Friday’s hearing, the decision “maintains the status quo while the Court evaluates the antitrust issues presented.”

Still, states could seek another temporary restraining order or injunction after 14 days, which could further delay the deal.

Another proposed media deal – $6.2 billion merger of broadcast station group owners Nextstar Media Group and Tegna v. was stayed after a similar lawsuit and injunction issued by the US court. The hearing of the case to be guided It is planned by Bonta to start in mid-2027.

The Paramount-WBD deal is being reviewed by the European Union and the United Kingdom, and a new interim deadline of July 22 has been granted.

The U.S. Department of Justice’s Antitrust Division signed off on the merger in June, clearing the deal of federal concerns. It has also received approval from many global jurisdictions.

Paramount said it is on track to close the deal by the end of September.

If the deal is delayed after that date, Paramount could face additional costs, such as a so-called toll fee that would kick in if it isn’t closed after September 30. The fee will be an additional 25 cents paid to WBD shareholders each quarter until closing; This would equate to approximately $650 million in cash value per quarter.

extraordinary also agreed There will be a $7 billion breakup fee if the deal moves forward due to regulatory concerns.

Bonta called the merger illegal and said it would “lead to higher prices, lower quality, and less film and television content, harming movie theaters, basic cable distributors, and ultimately audiences on every couch and movie theater seat in the United States.”

The states that sued against the deal said they believed the combined entity would control about a third of movies and nearly a third of basic cable TV programming.

Paramount argued that the deal was “pro-competitive.”

In court documents filed Thursday, Paramount said the temporary restraining order “represents one of the weakest merger challenges in modern antitrust history.”

The company said the deal would “produce higher quality content for consumers; encourage investment in film production that creates jobs; stabilize basic cable television (seriously threatened by cable cutting); and increase the output of theatrical releases in a challenging entertainment environment.”

— CNBC’s Sarah Whitten And Stephen Desaulniers contributed to this article.