Paramount aims for September WBD close as states sue to block deal

Paramount Skydance is still targeting a late-September close for its planned acquisition of Warner Bros. Discovery, even after state attorneys general sued to stop the deal. For investors, the key issue is timing: a court-ordered delay could push the closing past Sept. 30 and trigger additional payments to Warner Bros. Discovery shareholders.

Jeffrey Kessler, Paramount’s lead trial counsel, told CNBC’s David Faber on Tuesday that the company continues to view the merger as lawful and beneficial to competition. Kessler said Paramount is prepared to take the fight to the Supreme Court if a prolonged legal block prevents the companies from closing.

The lawsuit was filed Monday by a group of state attorneys general led by California Attorney General Rob Bonta. The states are trying to block the combination on antitrust grounds, meaning they argue the deal could reduce competition in ways that hurt consumers or other businesses. Their concerns focus on film and pay television, according to Bonta’s office.

Later Monday, the coalition sought a temporary restraining order. A temporary restraining order, often called a TRO, is a short-term court order that can pause a transaction while a judge considers the dispute. Kessler said the request came after Paramount indicated it wanted to be able to close as soon as July 22, assuming it received all remaining regulatory approvals.

The July 22 date lines up with a deadline in Europe. The European Union has been reviewing the deal and recently set that date as a provisional target for its decision. Paramount has submitted concessions to EU regulators as it seeks approval, according to reports cited by CNBC.

The proposed merger has already been cleared by the U.S. Department of Justice’s Antitrust Division and other jurisdictions, according to CNBC. The states’ challenge adds a new legal hurdle even after those approvals.

Kessler told CNBC that Paramount would accept a court schedule that resolved the dispute by early September. He said the state attorneys general rejected that option as well as the possibility of letting the deal close.

If a temporary restraining order is granted, it would hold up the deal for 14 days. CNBC reported that as many as two temporary restraining orders could be granted before the states seek a preliminary injunction, a longer-lasting court order that could keep the merger frozen while the case proceeds.

A delay carries a direct financial cost. Under the deal terms described by CNBC, Paramount agreed to a ticking fee, which is an extra payment owed when a transaction misses a set closing deadline. If the merger closes after Sept. 30, Paramount would owe Warner Bros. Discovery shareholders additional fees worth about $650 million in cash value per quarter until the deal is completed.

Kessler argued that the deal would strengthen competition, saying on CNBC, “This merger is pro-competitive.” He said the entertainment business is under pressure as consumers leave traditional pay TV bundles and streaming rivals such as Netflix, Disney and Amazon’s Prime compete for subscribers.

Bonta described the deal differently in a Monday release, saying it would “lead to higher prices, lower quality, and less content for film and television,” with harm to movie theaters, basic cable distributors and audiences.

Paramount has also tried to address concerns from Hollywood. CEO David Ellison has said the combined studios would release 30 films a year. Kessler told CNBC that Paramount is willing to put that commitment in writing for the states, with litigation possible later if the company fails to meet it.

This story draws on original reporting from CNBC.