A U.S. judge has temporarily halted Paramount Skydance’s proposed $110 billion takeover of Warner Bros. Discovery. The court issued a 14-day injunction in response to a lawsuit filed by a coalition of state attorneys general led by California Attorney General Rob Bonta.
California Federal District Court Judge Araceli Martinez-Holgin issued a temporary injunction preventing Paramount from completing the deal. The order bars the companies from taking further steps to complete the merger while the court reviews the states’ antitrust lawsuit.
The lawsuit alleges that the deal would illegally concentrate power in the media industry by combining Paramount and Warner Bros. studios, CBS, cable networks CNN, TNT, MTV and BET, and streaming platforms Paramount+ and HBO Max under one company.
Prosecutors say the deal violates Section 7 of the Clayton Antitrust Act of 1914. This federal law prohibits mergers that would substantially lessen competition.
The ruling marks the first legal setback for a major media merger, even though the deal has already received approval from the U.S. Justice Department and several international regulators.
The states could seek a preliminary or new temporary injunction, which could delay the deal beyond Paramount’s planned September closing date and impose additional costs, including a quarterly “accrual fee” payable to Warner Bros. Discovery shareholders if the deal doesn’t close by September 30.
The temporary injunction was granted after Paramount told the court it intended to close the deal on July 22, once it had received all necessary regulatory approvals.
If the deal is not completed by September 30, Paramount will be required to pay Warner Bros. Discovery shareholders an additional 25 cents per share for each quarter. This would total more than $600 million per quarter.
In addition, Paramount has agreed to pay a $7 billion termination penalty if the acquisition ultimately falls through due to regulatory hurdles.