US judge grants temporary restraining order blocking PSKY-WBD merger

Paramount’s studio lot

A US federal judge has issued a temporary restraining order (TRO) against Paramount Skydance (PSKY)’s proposed acquisition of Warner Bros Discovery (WBD), after a coalition of 12 states last week filed an antitrust lawsuit to block the US$110bn deal.

Araceli Martínez-Olguín, a judge of the US District Court for the Northern District of California, on Monday granted the TRO, which prevents PSKY from closing the deal in the next 14 days.

The TRO pauses the merger while the court weighs whether to issue a preliminary injunction, which, if granted, would block the merger for the duration of the legal proceeding. The court’s decision comes after both sides presented arguments during a hearing on Friday.

In the order issued on Monday, Martínez-Olguín said the 12-state coalition presented “compelling evidence that the combined firm resulting from the transaction will possess substantial market share in the wide-release theatrical distribution market.”

The lawsuit, which is led by California attorney general Rob Bonta, argues the combination of the companies’ theatrical businesses and cable channel portfolios would “extinguish” competition. In addition to the state of California, the suit also includes New York, Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, Oregon and Washington.

PSKY has pushed back, claiming the lawsuit is “based on a misrepresentation of competition in the entertainment industry today” and calling for it to be rejected for its “fundamentally flawed application” of antitrust laws.

Martínez-Olguín set August 3 for a court hearing to decide whether to issue a preliminary injunction. Should the preliminary injunction ultimately be granted, it could prove to be a major spanner in the works for PSKY as the litigation could drag on for months or years.

PSKY has repeatedly vowed to close the deal by September 30. If it goes beyond that date, the David Ellison-led company has agreed to pay WBD shareholders a daily ‘ticking fee’ equal to US$0.25 per share per quarter. The ticking fee equates to around US$650m each quarter, or roughly US$7m per day. Should the deal fall apart altogether, PSKY would be required to pay a US$7bn regulatory termination fee.

Bonta called the TRO a “critical first win” in ensuring the “unlawful” mega-merger “never sees the light of day.”

He added: “History tells the tale of what happens when a few people have great power over markets that are central to Americans’ lives: fewer opportunities for more people, worse products and services for all people. With our lawsuit, we’re fighting for a free and fair market and a thriving film and television industry that serves creatives and audiences alike. We have a full tank of gas, the law on our side, and look forward to continuing to make our case.”

PSKY had not responded to a request for comment at press time.