Restraining Order Granted in Paramount Skydance/Warner Bros. Discovery Merger

It’s an early win for a dozen State Attorneys General in their lawsuit attempting to stop the merger between Paramount Skydance and Warner Bros. Discovery. The temporary restraining order pauses the merger for 14 days and in response to a lawsuit filed July 13 by California, Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, and Washington.

The lawsuit was filed in the U.S. District for the Northern District of California and alleges the deal violates Section 7 of the Clayton Act. That focuses on lessening competition through mergers and is an attempt to prevent monopolies.

U.S. District Judge Araceli Martinez-Olguin wrote that the AG’s:

…present compelling evidence that the combined firm resulting from the transaction will possess substantial market share in the wide-release theatrical distribution market.

On this combined firm market share alone, the Court is persuaded that it can presume the proposed merger is likely to violate antitrust laws.

The order prevents the deal from “closing” or “consummating” or taking any steps that would integrate or consolidate the operations.

Attorney General Bonta said in a statement:

My office and attorneys general nationwide have secured an emergency order blocking the unlawful merger of Warner Bros. and Paramount. This is a critical first win in our case to ensure this megamerger never sees the light of day. History tells the tale of what happens when a few people have great power over markets that are central to Americans’ lives: fewer opportunities for more people, worse products and services for all people. With our lawsuit, we’re fighting for a free and fair market and a thriving film and television industry that serves creatives and audiences alike. We have a full tank of gas, the law on our side, and look forward to continuing to make our case.

The AGs argued the temporary restraining order was needed because Paramount had indicated it could possibly close the deal soon. Paramount’s lead attorney, Jeffrey Kessler, said that they were prepared to commit to not closing the merger for the next 28 days.

The decision is important as it delays the closing of the deal for Paramount. Paramount Skydance wants the deal to close before September 1, 2026 or the cost will increase the longer it drags on. The price increases 25 cents per share per quarter it’s not approved. That would add $627 million to the cost of the overall deal each quarter, or roughly $7 million per day. This lawsuit could drag on for months making it unlikely the deal will close by that date. The company has said delays could force it to renegotiate the deal’s financing, cause uncertainty for its stock price, or end the transaction altogether.

Source: Graphic Policy