US court pauses $110 billion Paramount Skydance WBD merger

MUMBAI: The biggest blockbuster in Hollywood this week wasn’t on the big screen, it was in the courtroom. A US federal court has temporarily halted Paramount Skydance’s proposed $110 billion acquisition of Warner Bros. Discovery, handing one of the world’s biggest media deals an early legal setback as regulators intensify scrutiny of consolidation in the entertainment industry.

US District Judge Araceli Martínez-Olguín ordered the companies to pause the transaction until 3 August, preserving the status quo while the court decides whether the merger should remain on hold for the duration of an antitrust lawsuit brought by a coalition of 12 states led by California.

The states, which include New York, Colorado and Massachusetts, argue the deal would significantly reduce competition in film and television distribution by creating excessive market concentration. They contend the combined company could wield greater influence over pricing, distribution and negotiations across the entertainment ecosystem.

In her order, the judge said the states had presented a strong preliminary case that the proposed merger could violate US antitrust laws. She also noted that allowing the transaction to close before the legal challenge is resolved could trigger irreversible changes, including workforce reductions and the sharing of competitively sensitive information between the two companies.

A central issue in the case is the claim that the merged entity would control around 27 per cent of the market for widely released films. The court said that allegation warranted closer examination during trial.

The lawsuit, filed on 13 July, argues that reducing the number of major film distributors would strengthen the merged company’s bargaining power with cinema operators, particularly in negotiations over revenue-sharing agreements.

At this stage, the court was not persuaded by Paramount Skydance’s argument that the growing presence of technology companies such as Amazon and Apple in the film business sufficiently offsets concerns about reduced competition.

The next key hearing is scheduled for 3 August, when the court will decide whether the transaction should remain suspended while the broader antitrust case proceeds, a process that could take several months.

The delay could also prove costly. Under the merger agreement, if the acquisition is not completed by 30 September, Paramount CEO David Ellison would be required to pay Warner Bros. Discovery shareholders a 25-cent-per-share “ticking fee”, amounting to approximately $7 million a day until the deal closes.

Investors reacted cautiously to the ruling, with Warner Bros. Discovery shares falling by as much as 4 per cent during Monday’s trading session as uncertainty surrounding the merger increased.

Paramount Skydance has maintained that the states’ allegations are without merit and said it expects the evidence presented during the proceedings to demonstrate that the transaction remains consistent with current competitive conditions in the global media industry.