The planned $110 billion transaction for Paramount to acquire the entirety of Warner Bros. Discovery has been put on hold under a temporary restraining order issued Monday.
The temporary restraining order occurs after a consortium of 12 state attorneys general last week filed a lawsuit against the merger transaction, which would place two major Hollywood studios under one corporate umbrella. Paramount is now unable to close this deal for the next two weeks, and the U.S. District Court for the Northern District of California has set a hearing on the preliminary injunction previously filed for Monday, Aug. 3.
California District Judge Araceli Martínez-Olguín signed the order, which stated that plaintiffs demonstrated a likelihood for success and that they would suffer irreparable harm without the TRO. Furthermore, the Ninth Circuit said that the plaintiffs sought the TRO to ensure the environment remains “status quo” and that the transaction does not close amid court evaluation of the merger.
“Paramount and Warner Bros. will continue to operate as separate, viable companies competing in the marketplace while they wait for the Court to adjudicate this case,” Martínez-Olguín wrote in the order. “The balance of equities, combined with the public’s vital interest in antitrust enforcement, therefore tips sharply in favor of the requested injunctive relief.”
The TRO further slows the pace of a deal that both companies previously stated would close in the fiscal third quarter. Paramount would owe WBD shareholders a $0.25/share “ticking fee” calculated daily for every quarter the deal is not closed “beginning after September 30, 2026,” something that could reportedly equate to about $650 million/quarter. WBD would receive a $7 billion termination fee from Paramount if the deal does not close because of not receiving regulatory approval.
“My office and attorneys general nationwide have secured an emergency order blocking the unlawful merger of Warner Bros. and Paramount,” California Attorney General Rob Bonta said in a statement. “This is a critical first win in our case to ensure this megamerger never sees the light of day.”
The court can extend the TRO after the two-week period “for good cause,” something for which the states could argue ahead of a preliminary injunction.
In a separate case, a preliminary injunction is currently in place preventing the proposed $6.2 billion merger between Nexstar and Tegna from closing. The plaintiffs in that case are eight state attorneys general and DirecTV.
Preliminary injunctions can result in transactions completely falling apart. The Walt Disney Company, Fox Corporation and Warner Bros. Discovery chose to abandon their Venu Sports joint streaming venture after being hit with a preliminary injunction requested by Fubo. The settlement for the case included a $220 million payment to Fubo, along with a business merger with Disney-owned Hulu + Live TV that closed last October.
Paramount previously called the lawsuit “a fundamentally flawed application of the antitrust laws” that is “wrong on both the facts and the law.” A company spokesperson argued that the deal would create more choices and competition, although the deal is ultimately consolidating two Hollywood studios and placing numerous linear networks under the same corporate umbrella. The Paramount spokesperson said that the lawsuit would in effect protect “dominant streaming platforms like Netflix and technology companies from much needed competition.”
Paramount has already received approval for the deal from the U.S. Department of Justice, along with other governments across the globe such as Canada, South Africa and Australia. United Kingdom culture secretary Lisa Nandy said in June that she was “minded to intervene” in the transaction, and the European Union has reportedly extended a “new provisional deadline” for the Phase 1 investigation of the deal to Wednesday, July 22.
Oregon Attorney General Dan Rayfield withdrew a state petition against the deal last week after asking a local court to delay the deal’s closure by 60 days. The state had been looking for Paramount to provide documents for an investigation into the transaction. The Oregon Department of Justice wrote that Paramount did not comply with a request to produce records around potential lobbying of public officials, any role it may have played in the statement from the U.S. Department of Justice approving the deal, and other internal efforts to receive regulatory clearance.
