California, NY among states prepping lawsuit to block Paramount-WBD merger

Several US states including California and New York are reportedly preparing a lawsuit to block Paramount Skydance’s proposed US$111bn acquisition of Warner Bros Discovery (WBD) on antitrust grounds.

David Ellison

Reuters on Friday said the legal action is expected to be filed in the coming weeks, while Bloomberg reported that Colorado, Connecticut, Massachusetts, Nevada, Oregon, Pennsylvania and Tennessee will also be involved.

Several states had previously said they were investigating the mega-merger, though this is the first indication that they intend to pursue legal action. It is not a surprise given California attorney general Rob Bonta, a Democrat who has led state scrutiny of the deal, has previously said the proposed combination is littered with “red flags.”

Paramount has said it expects the deal to close by the end of the third quarter, but reports suggest the David Ellison-led company may be pushing for a close as early as next month. WBD shareholders approved the deal in late April.

While it is unclear whether the multi-state lawsuit would ultimately be successful, it could slow the timeline on which the deal is approved. That would make the deal more expensive for Paramount, which has agreed to add an additional 25 cent “ticking fee” for every quarter if the deal has not closed by September 30.

Following the reports from Reuters and Bloomberg on Friday, Paramount shares fell 4% while WBD shares were down around 2.8%.

The European Commission is also reviewing the merger, with the organisation setting a July 7 deadline to arrive at a decision.

Outside of the lawsuit from California and other states, the transaction is also the subject of a consumer lawsuit filed by five streaming subscribers in April, arguing the combination will inflate prices and reduce choice.

Last week, Paramount pushed back on the lawsuit, saying it was a “clumsy attempt to politicise antitrust litigation, untethered to any established antitrust principles or law, has no place in this courthouse and must be rejected.”