Legal issues delay Paramount-Warner Bros. Discovery merger until next year

Ellisons angling to take case to Supreme Court

The blockbuster Paramount-Warner Bros. Discovery merger may have to wait a while to commence. 

In the face of continuing legal troubles, Paramount has agreed to postpone closing its deal to acquire Warner Bros. Discovery until next summer.

This comes as twelve state AGs and the Writer’s Guild of America have sued to block the merger on anti-trust grounds, believing it would raise prices, reduce job opportunities, and reduce choice for consumers. On Monday, a judge issued a temporary restraining order for two weeks, and then extended it in order to sort out the issues, guaranteeing the case will reach trial. Paramount has pushed back the closing date of the deal numerous times, saying it would close by July, then late September, and now agreed with the court to delay closing the deal as late as June 1, 2027 or when the court decides to rule on the matter – which ever comes first. 

The delay will certainly raise the price of the acquisition for Paramount, as a ticking fee of 25 cents per share – or $7 million per day and $650 million per quarter to Warner shareholders – kicks in on September 30 if the deal isn’t closed by this date. If the deal falls through, Paramount would owe WBD a $7 billion breakup fee.

Despite the likelihood of increased cost of the acquisition and the possibility of the deal collapsing, Paramount desperately spun this as a “win” for them. 

“The result is exactly what we have sought from the outset: a direct path to a trial based on the evidence”, they said. “This is the fastest and clearest way to prove that this transaction is good for competition, good for consumers, and good for creators, a conclusion dozens of competition authorities around the world have already reached,” the company said. “Plaintiffs’ market definitions bear no relationship to the realities of today’s marketplace and cannot withstand scrutiny. We look forward to proving our case at trial.”

The plaintiffs also declared victory on Friday. 

“Our argument against this illegal merger is straightforward: When too few corporations have too much power in markets central to American life, it makes things more expensive, and it makes things worse,” California AG Rob Bonta said in a statement Friday, who is leading the charge for the states. “Today’s agreement is great news for audiences, movie theaters, and the many people who write, build, and create the art, news, and entertainment so many of us enjoy. We are eager to continue to make our case in court and celebrate another tremendous win in our effort to ensure this unlawful merger never sees the light of day.”

Earlier this week, the European Union cleared the merger, with conditions. The Justice Department rubber-stamped the merger earlier this year with no conditions. 

Paramount owner David Ellison, and his chief financing backer, Oracle founder and his father Larry, plan to build a case as this heads to trial. If Paramount loses this case in court, they’ll likely appeal to the Ninth Ciruit Court, and to the U.S. Supreme Court – that is, if they agree to hear the case. The Court has sided with big business interests in the past, and this would have repercussions for all businesses no matter which way any verdict lands – especially if it comes to the nation’s anti-trust laws. 

WBD. originally planned to split the struggling company into two, with Netflix acquiring the Warner Bros. television and film portions, but those plans changed when Paramount with the backing of the elder Ellison, made a hostile bid for the whole company. WBD shareholders abandoned the idea and accepted Ellison’s bid, stunning Hollywood and media observers alike, as no company has ever prevailed on a hostile takeover of any media property. The last hostile takeover attempt involved Paramount itself in 1994, when it fended off Barry Diller’s QVC after it agreed to take a bid from Viacom.