Federal Judge Halts Paramount-Discovery Merger
A federal judge has temporarily blocked the $81 billion merger between Paramount and Warner Bros. Discovery for at least two weeks, allowing time for states challenging the deal to present their cases in court.
Twelve states, led by California, initiated a lawsuit last week to obstruct Paramount’s acquisition of Warner Bros., claiming the merger would “eliminate competition” in Hollywood and diminish options for consumers nationwide, particularly for moviegoers and cable TV subscribers.
The state’s attorney general urged both companies to refrain from finalizing the deal until the court had the chance to thoroughly assess their claims. After the companies moved forward regardless, he sought a temporary restraining order, which District Judge Araceli Martinez Holguin affirmed on Monday. This ruling paves the way for potential preliminary injunctions aimed at effectively blocking the merger.
“This is the first significant win in our fight to prevent this mega-merger,” California Attorney General Rob Bonta remarked after the ruling. “History shows that when a handful of entities hold too much market power, the result is fewer opportunities for many and lower-quality products and services.”
The merger would unite two of the final five legacy studios in Hollywood, incorporating a range of titles spanning television networks, streaming services, and news outlets. This includes Warner’s HBO Max with hits like “Harry Potter,” alongside CNN and Paramount-owned CBS, not to mention the Paramount+ streaming service.
Paramount has yet to respond to Monday’s order. However, the company, which was acquired by Skydance last year, has promised to “vigorously defend” against the takeover of Warner. They have previously dismissed the states’ claims as “false on both fact and law,” insisting that the merger would enhance competition with major entertainment rivals. They also highlighted that the deal received regulatory approval in other regions, including during President Trump’s administration.
The temporary restraining order puts any further progress on hold for at least 14 days, with the potential to extend that to 28 days. A hearing for each state’s motion for a preliminary injunction is scheduled for August 3, though that date could change.
Time is of the essence. There was considerable speculation that Paramount and Warner might attempt to finalize the deal as soon as this week. Before this ruling, the companies had proposed to complete preliminary injunction hearings by the end of August, allowing room for an appeal by September 30. Paramount is keeping that date in mind, as it has promised shareholders additional “ticking fee” compensation of about $7 million a day if the deal remains unresolved by then.
However, the states contend that the proposed timeline is both unprecedented and inequitable. They argued that the financial burden Paramount would face after September 30 stems from decisions they made independently. During Friday’s hearing, they suggested starting the trial in April 2027 to allow sufficient time for gathering evidence.
Taking on billions in debt, Paramount’s planned acquisition of Warner is currently estimated at around $111 billion when accounting for outstanding shares.
Alongside California, other states involved in the lawsuit include Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, and Washington. Additionally, organizations such as the Writers Guild of America are also seeking to block the merger.
