US Judge Puts Brakes on Paramount Skydance's $110bn Warner Bros. Discovery Deal

In a significant development, a federal judge in the United States has instructed Paramount Skydance to temporarily halt its proposed acquisition of Warner Bros. Discovery, valued at $110 billion. The decision, handed down by US District Judge Araceli Martínez-Olguín in Oakland, is a preliminary victory for a group of states led by California, which has raised concerns that the merger could lead to a substantial decrease in competition. The coalition, which includes New York, Colorado, and Massachusetts, had argued that the proposed acquisition would likely violate antitrust laws. Judge Martínez-Olguín has scheduled a hearing for August 3 to determine whether the injunction should be extended, effectively blocking the transaction until the court can consider whether the merger should remain on hold for the duration of the lawsuit. This lawsuit, filed on July 13, could take several months to resolve. Following the ruling, shares of Warner Bros. Discovery fell by as much as 4% in afternoon trading. New York Attorney General Letitia James welcomed the decision, stating, 'Today’s decision is an important victory for all those who would be hurt by this merger, and I look forward to continuing to fight this case.' Paramount, on the other hand, has defended the proposed transaction, dismissing the states' competition concerns. A company spokesperson said, 'We are confident the evidence will demonstrate that the State AGs’ antitrust arguments are without merit as their alleged markets and claims of anticompetitive effects are without any basis in modern market realities.' The lawsuit threatens to disrupt Paramount Chief Executive David Ellison's plan to transform the company into a stronger competitor to Netflix and Disney. The states argue that the merger would create a media giant with the power to raise prices across the film and television industries. Judge Martínez-Olguín agreed with the states that allowing the deal to close before the case is decided could result in irreversible changes, including job cuts and the sharing of sensitive business information, even if the merger is ultimately found to be unlawful. The judge also noted that the transaction appears likely to breach antitrust law if it gives the combined company a 27% share of the market for the distribution of widely released films. A prolonged delay could prove costly for Paramount Skydance, as the company would be required to pay Warner Bros. Discovery shareholders a 'ticking fee' of 25 cents per share, equivalent to about $7 million per day, for every day the deal remains delayed beyond September 30.