Paramount says it will take the Warner Bros. merger to the Supreme Court if states block the deal
The TL;DR
Paramount is vowing to fight a 12-state antitrust lawsuit blocking its $110 billion Warner Bros. Discovery deal, saying it will go to the Supreme Court.
Paramount Skydance is still aiming to close its estimated $110 billion acquisition of Warner Bros Discovery by the end of September despite a lawsuit filed by 12 federal attorneys seeking to block the deal on antitrust grounds. Jeffrey Kessler, Paramount’s trial lawyer, told CNBC on Tuesday that the company is willing to take the matter to the Supreme Court if it faces a lengthy injunction. The coalition, led by California Attorney General Rob Bonta, filed a lawsuit in federal court on Monday and followed up with a request for a temporary injunction that night.
The lawsuit alleges that merging two of Hollywood’s five largest film distributors and its two largest five basic cable channel owners would significantly reduce competition throughout the country’s theatrical distribution, cable programming, and broader entertainment industry. Bonta said in a statement that the merger would lead to higher prices, lower quality, and less content for viewers. The deal had received approval from the Justice Department’s Antitrust Division, which concluded in June that the transaction would not have harmed competition, making the state-level challenge a direct rebuke to the agency’s findings.
Kessler told CNBC’s David Faber that Paramount expressed its intention to close the deal before July 22, the day the European Union is expected to issue its own regulatory decision. Paramount recently submitted agreements to the EU to address remaining concerns. Kessler said the company offered the states two options, a quick shutdown or an orderly judicial process that would resolve the matter by early September, but the states rejected both.
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The financial pressure on Paramount is real. Under the merger agreement, if the deal doesn’t close by Sept. 30, Paramount must pay Warner Bros. Discovery shareholders a markup fee worth about $650 million per quarter until closing. A temporary restraining order, if granted, could stop the transaction for 14 days, and could be issued for up to two days before the states seek a preliminary injunction that would stop the deal during the trial.
Kessler said consolidation promotes competition rather than inhibits competition, noting that the entertainment industry is in deep trouble as consumers shy away from pay TV bundles and competition from streaming heats up. He said the combined company would be able to compete directly with Netflix, Disney, and Amazon’s Prime Video. CEO David Ellison has promised that the combined company will release 30 films a year, and Kessler said Paramount is committed to underwriting that commitment.
The deal has already cleared the DOJ and several international regulators, and Paramount has been consolidating its broadcast technology to prepare to absorb HBO Max after the shutdown. Whether state attorneys can delay the project long enough to trigger the tagging fee, or block it entirely, will likely depend on how quickly the federal court in Sacramento acts on the request for a restraining order.
