US states eye lawsuit to stop Paramount-Warner Bros merger

CALIFORNIA: The script for Hollywood’s biggest media merger is becoming increasingly complicated. Paramount’s proposed $110 billion acquisition of Warner Bros. Discovery is facing the prospect of legal action from multiple US states, even as the company has agreed to delay closing the deal until at least July 22. According to Reuters.

California is leading a multistate investigation into whether the merger would unlawfully reduce competition, with Rob Bonta spearheading the effort. According to Reuters, states concerned about the impact of the transaction could file a lawsuit as early as next week, potentially delaying one of the largest media deals in recent years.

The proposed merger would unite two of Hollywood’s four major film studios, prompting opposition from actors, writers and cinema owners. Critics argue that combining the studios could lead to job losses, fewer film releases and reduced consumer choice in the theatrical market.

Paramount has defended the deal, arguing that greater scale is needed to compete in an increasingly crowded entertainment landscape. The company has said the combined studio would release around 30 films annually, while chief executive David Ellison has sought to reassure exhibitors that theatrical releases will remain a priority.

The regulatory pressure is already affecting the transaction timeline. On Wednesday, Oregon Attorney General Dan Rayfield asked a state court to compel Paramount to provide documents and delay the merger by 60 days to allow for further review. During a preliminary hearing, Paramount confirmed it would not complete the acquisition before July 22, extending an earlier commitment not to close before July 16.

Any prolonged delay could prove costly for Paramount. Reuters reported that the company is expected to carry around $80 billion in debt after the transaction closes. Under the merger agreement, Paramount must also pay Warner Bros. Discovery shareholders a ticking fee of 25 cents per share, amounting to roughly $650 million in cash every quarter, if the deal remains unfinished beyond October.

The merger is also under review in Europe. Reuters previously reported that Paramount has proposed remedies to address competition concerns raised by the European Commission, including exiting its film distribution joint venture with Universal Pictures. The Commission has extended its review deadline to July 22 to assess those proposals.

While lawsuits seeking to block mergers do not always succeed, they can significantly slow transactions if courts order companies to pause integration while legal proceedings continue. If multiple states move ahead with coordinated legal action, Paramount’s plans to unlock an estimated $6 billion in cost savings from the merger could face further delays.