Judge pauses Paramount-Warner Bros. Discovery deal for 14 days

A federal judge has put Paramount Skydance’s planned purchase of Warner Bros. Discovery on hold for 14 days, slowing one of the biggest media deals on the table. For investors, the pause raises timing risk around a $110 billion transaction that Paramount says it still expects to close by the end of September.

California District Judge Araceli Martínez-Olguín approved a temporary restraining order on Monday after hearing arguments Friday in Oakland. A temporary restraining order, often called a TRO, is a short-term court order that freezes action while a judge considers the next steps in a legal dispute.

The order came in a lawsuit brought by a group of state attorneys general led by California Attorney General Rob Bonta. The states are trying to block the merger on antitrust grounds, arguing that combining the companies would reduce competition in film, television and streaming.

What the states are challenging

The proposed acquisition would put Paramount’s film studio and CBS broadcast network together with Warner Bros., cable networks including CNN, TNT, MTV and BET, and streaming services Paramount+ and HBO Max. The states said in their lawsuit that the combined company would control nearly one-third of films and nearly one-third of basic cable TV programming.

Bonta called the merger unlawful and said it would “lead to higher prices, lower quality, and less content for film and television, harming movie theaters, basic cable distributors, and ultimately, audiences on every sofa and movie theater seat in the U.S.”

Antitrust law focuses on whether a deal could give a company enough market power to harm consumers, suppliers or competitors. In this case, the states are arguing that fewer major media owners could mean worse terms across theaters, cable distribution and programming.

Paramount says the deal helps competition

Paramount has rejected the states’ claims and has described the transaction as “pro-competitive.” In court papers filed Thursday, the company called the request for a restraining order “one of the weakest merger challenges in modern antitrust history.”

Paramount said in the filing that the merger would create more high-quality content for consumers, support investment in film production jobs, stabilize basic cable television as cord cutting pressures the industry, and increase theatrical releases.

Paramount’s lead trial counsel, Jeffrey Kessler, said on CNBC earlier in the week that the temporary restraining order was filed after Paramount indicated it could close the deal as soon as July 22, when the company expected to have all regulatory approvals.

What happens after the pause

The 14-day order does not end the deal. It stops the companies from advancing the merger during that window while the lawsuit continues.

The states could ask for another temporary restraining order or seek a preliminary injunction, which is a longer court order that can delay a deal while litigation plays out. Bonta is also leading a similar challenge to Nexstar Media Group’s proposed $6.2 billion combination with Tegna, which a U.S. court has paused through a preliminary injunction.

The Paramount-Warner Bros. Discovery deal has already received clearance from the U.S. Department of Justice’s Antitrust Division, which signed off in June. It has also been approved in several other jurisdictions. Reviews in the European Union and the U.K. were still pending, with a provisional July 22 deadline.

If the merger is delayed past Sept. 30, Paramount could owe a ticking fee, a payment that compensates sellers for waiting longer to close. CNBC reported that the fee would add 25 cents per Warner Bros. Discovery share per quarter until closing, equal to about $650 million in cash value per quarter. Paramount has also agreed to a $7 billion breakup fee tied to regulatory concerns.

This story draws on original reporting from CNBC.