European Commission clears PSKY-WBD merger, WGA seeks preliminary injunction

The Paramount lot in LA

Gary Bembridge via CC

Paramount Skydance (PSKY) has received approval from the European Commission (EC) for its acquisition of Warner Bros Discovery (WBD), with the David Ellison-led media company calling the green light a “major milestone” in completing the US$110bn deal by September 30.

The EC cleared the merger after PSKY agreed to several key concessions, including committing to ending a European joint venture with Universal Pictures within 13 months of closing the deal, and agreeing not to strike any film distribution pacts with Universal or Disney in Europe over the next decade.

In addition, PSKY agreed it would not shift the distribution of Warner Bros theatrical movies to its own studio.

The EC said the commitments “fully address the competition concerns” that it had raised, paving the way for the approval.

In a statement, PSKY said approvals from the EC and others are a recognition that the deal will “enhance consumer choice and enable a creative-first company to invest in more projects and bring stories to audiences worldwide.” It added that bodies and governments spanning 65 jurisdictions have now approved or opted not to challenge the merger.

But while the controversial deal has cleared another hurdle in Europe, the legal challenges continue to mount in the US.

On Wednesday, the Writers Guild of America (WGA) filed a motion seeking a preliminary injunction against the merger. The move comes one week after the WGA filed a lawsuit to block the deal, claiming it would “eliminate competition for buying film and television writing, resulting in suppressed compensation, worse deal terms and reduced programming volume and diversity.”

The WGA’s motion comes after a coalition of 12 US states, led by California attorney general Rob Bonta, was successful in obtaining a temporary restraining order (TRO) that blocks the deal from closing until at least August 3.

The TRO, issued on Monday, pauses the merger for 14 days while the court weighs whether to issue a preliminary injunction, which, if granted, would block the deal for the duration of the legal proceeding. At present, the hearing with Araceli Martínez-Olguín, a judge of the US District Court for the Northern District of California, is scheduled for August 3 but could be postponed by another 14 days.

PSKY has vowed to close the deal by September 30. Should it go beyond that date, it has agreed to pay WBD shareholders a daily ‘ticking fee’ equal to US$0.25 per share per quarter. The fee equates to around US$650m each quarter, or roughly US$7m per day. Should the deal collapse altogether, PSKY would also be required to pay a US$7bn regulatory termination fee.

PSKY’s stock rose around 3% on Wednesday following the news of the EC approval. However, the share price is down more than 11% this past month as various legal challenges have gathered momentum.

“Today’s approval from the European Commission marks another significant milestone in bringing Paramount and Warner Bros Discovery together,” said PSKY chief legal officer Makan Delrahim. “We appreciate the Commission’s constructive engagement and thorough analysis throughout its review.”