Paramount delays Warner Bros. merger until 2027 amid antitrust lawsuit

Paramount Skydance has agreed to delay its $111 billion acquisition of Warner Bros. Discovery until June 2027 or until a federal judge rules on the merits of a lawsuit filed by 12 states, according to a court filing on Friday Source: AP News. The deal, which would combine two of Hollywood's five major studios, was temporarily blocked earlier this week by Judge Araceli Martínez-Olguín after a coalition led by California Attorney General Rob Bonta argued it would substantially lessen competition Source: Los Angeles Times.

The legal challenge

• A dozen states, all Democratic-led, sued on July 13, alleging the merger violates the Clayton Act by creating a "media behemoth" that would harm consumers, workers, and creators Source: DW News.
• The Writers Guild of America has filed a separate lawsuit, claiming the deal would suppress writers' wages and reduce employment opportunities Source: Engadget.
• Paramount maintains the merger is pro-competitive, noting that the U.S. Department of Justice and European Commission have already approved the deal with conditions Source: BBC.

Costs and next steps

• Under the merger agreement, Paramount will owe Warner Bros. shareholders a "ticking fee" of $0.25 per share per quarter starting October 1, amounting to roughly $7 million per day if the deal is not closed by September 30 Source: CNBC.
• If the merger fails by June 2027, Paramount would owe a $7 billion breakup fee Source: Los Angeles Times.
• Both sides must propose a trial schedule by July 31, with the August 3 preliminary injunction hearing now canceled Source: CNN.