Federal Judge Pauses Paramount Skydance-Warner Bros. Discovery Merger

A federal judge has temporarily halted the proposed merger between Paramount Skydance and Warner Bros. Discovery. California District Judge Araceli Martínez-Olguín issued a 14-day restraining order on Monday, preventing the companies from finalizing their deal.

The pause follows a lawsuit initiated last week by a coalition of state attorneys general, who argue the merger would violate antitrust laws. Judge Martínez-Olguín stated that the restraining order was in the public's best interest, allowing for further review of the antitrust concerns presented in the lawsuit.

The state attorneys general, led by California Attorney General Rob Bonta, contend that the merger would diminish competition among movie studios and grant the combined entity excessive market power over cable channels. They have also requested a preliminary injunction to block the deal indefinitely until the merits of their case are decided.

Judge Martínez-Olguín has scheduled a preliminary injunction hearing for August 3 to determine if the temporary restraining order should be extended. The order has the potential to be extended for good cause, possibly for up to 28 days.

Paramount has stated its confidence that the antitrust arguments are without merit. A spokesperson asserted that the merger is lawful, pro-competitive, and would benefit consumers, creators, workers, and the broader entertainment industry.

This delay introduces uncertainty for shareholders of both Paramount and Warner Bros. Discovery. Any prolonged halt could incur significant costs for Paramount, which has committed to a 25-cent-per-share ticking fee to WBD shareholders for each quarter the deal remains unclosed past September 30. This fee could amount to approximately $650 million quarterly. Paramount has expressed its aim to complete the deal by the end of September.

According to Axios, this delay marks the most significant legal challenge to the merger globally to date.