12 States Move to Block Paramount's $110 Billion Warner Bros. Deal

Paramount Skydance Corp. NASDAQ:PSKY, one of the largest U.S. film studios, is facing a major legal challenge to its proposed $110 billion acquisition of Warner Bros. Discovery Inc. NASDAQ:WBD, a film and cable-television programming company. A coalition of 12 states led by California Attorney General Rob Bonta has asked a federal court in San Francisco to issue a preliminary injunction that would prevent the transaction from closing while the states' antitrust case continues. The states also requested a 14-day temporary restraining order, arguing that a short-term pause may be necessary while the judge considers the broader injunction request. Such an order could delay the deal for months and would represent an important early victory for the states, even if the restriction were only temporary.

The companies could potentially complete the transaction as early as July 22 after European regulators issue their decision, although Paramount's outside counsel, Jeffrey Kessler, said the company does not expect to close by that date. Kessler nevertheless said he believes the acquisition could be completed during the third quarter, either because the attorneys general fail to secure an injunction or because the parties reach a settlement. U.S. District Judge P. Casey Pitts has scheduled a Friday hearing to consider whether the deal should be paused, while the states have requested a ruling before 11:59 p.m. New York time on July 21. The lawsuit has become the largest legal hurdle facing the acquisition after the Trump administration approved the transaction without conditions in June.

For investors, the court's decision may influence the timing and completion prospects of one of Hollywood's largest proposed combinations. The states claim the transaction would combine two of the five largest U.S. film studios and give the merged company control of 27% of the market for films receiving wide theatrical releases. They also allege that Paramount and Warner Bros. would control more than 30% of anticipated big-budget blockbusters, leaving four companies with more than 90% of that market. Those companies would include the combined Paramount-Warner Bros. business, Walt Disney Co. NYSE:DIS, a major film studio, Universal, a major film studio, and Sony Pictures NYSE:SONY, a major film studio. Paramount has said it plans to vigorously defend the transaction as the states pursue a permanent injunction.