Paramount Skydance (PSKY, Financials), the media company behind Paramount Pictures, CBS and its streaming operations, is facing a new legal threat to its planned $110 billion purchase of Warner Bros. Discovery.
California and 11 other states sued Monday to block the deal, arguing that combining the two entertainment companies would reduce competition in movie distribution and cable television.
The states said the merged company would control about 27% of U.S. film distribution, 30% of blockbuster releases and 27% of the basic cable channel market.
The lawsuit could take months to resolve. That delay matters because Paramount has agreed to pay Warner Bros. Discovery shareholders about $650 million for every quarter the transaction remains unfinished after October.
The company says the merger would allow the combined studios to release more movies while cutting $6 billion in overlapping infrastructure, marketing and corporate costs. Paramount has pledged to release 30 films a year.
The Justice Department has already cleared the transaction, but the states' challenge creates a separate hurdle.