Paramount agrees to delay Warner Bros. Discovery takeover for months

By Brian Stelter, CNN

(CNN) — Paramount says its takeover of CNN’s parent company, Warner Bros. Discovery, will be delayed for many months, and potentially well into 2027, due to pending lawsuits by state attorneys general and the Writers Guild of America.

Paramount said in a Friday afternoon court filing that it has agreed not to complete the mega-merger until an antitrust trial takes place, or until June 1, 2027, whichever comes first.

The current Paramount–Warner merger agreement expires on March 4, and is subject to an automatic extension through June 4, 2027.

Friday’s announcement blows up Paramount’s original plan to take control of Warner by the end of September. The delay was celebrated by critics of the deal. Shares in both Paramount and WBD slumped on the news.

The delay does not preclude all the parties involved from striking a settlement deal that would clear the path for the merger, though there are no indications that the cases are heading in that direction.

For the time being, at least, the deal uniting two of Hollywood’s biggest studios is in a deep freeze.

Friday’s agreement is the result of discussions between the lawyers for all the parties. It means there will no longer be an August 3 hearing on the states’ request for a preliminary injunction, and it withdraws the Writers Guild’s similar motion.

Lawyers for Paramount reached the conclusion that the plaintiffs would likely prevail at the preliminary injunction stage, an executive involved in the matter told CNN.

Thus, the source said, Paramount believes it’s better for the company to skip that stage and seek a speedy jury trial.

Judge Araceli Martínez-Olguín, who is overseeing the case, quickly approved the agreement.

According to court filings, the parties will now work out timing for a trial on the underlying antitrust claims, with a proposed schedule due next Friday.

Paramount is saying “let’s go straight to trial in California District Court,” analyst Rich Greenfield of Lightshed Research said. Greenfield noted that “even if Paramount loses in District Court, this would accelerate the time frame for an appeal to the Ninth Circuit Court and potentially to the Supreme Court in 2027.”

Paramount claimed the agreement is a “significant win” for the company “because the result is exactly what we have sought from the outset: a direct path to a trial based on the evidence.”

“This is the fastest and clearest way to prove that this transaction is good for competition, good for consumers, and good for creators, a conclusion dozens of competition authorities around the world have already reached,” the company said in a statement. “Plaintiffs’ market definitions bear no relationship to the realities of today’s marketplace and cannot withstand scrutiny. We look forward to proving our case at trial.”

But analysts called it a major setback that adds to the cloud of doubt hovering over the controversial deal.

The delay is potentially costly for Paramount. Under the terms of the merger agreement, the company will begin to owe Warner Bros. Discovery shareholders a 25-cent-per-share “ticking fee” each quarter the transaction remains incomplete after September 30.

The US Department of Justice approved the merger last month, and the European Commission granted conditional approval on Wednesday. The EU approval required Paramount to make several concessions, including exiting a film distribution joint venture with Universal in Europe.

The lawsuits in California are the deal’s main obstacle. A coalition of 12 state attorneys general has argued that the merger would reduce competition and hurt consumers.

“Our argument against this illegal merger is straightforward: When too few corporations have too much power in markets central to American life, it makes things more expensive, and it makes things worse,” California Attorney General Rob Bonta said in a statement Friday afternoon.

Bonta said, “We are eager to continue to make our case in court and celebrate another tremendous win in our effort to ensure this unlawful merger never sees the light of day.”

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