Paramount has agreed not to close its proposed merger with Warner Bros. Discovery until June 1, 2027, or until shortly after the merits of lawsuits brought by state attorneys general and the Writers Guild of America are resolved.
The agreement is an extraordinary new development in the merger transaction, which has won regulatory approval from the federal government and European regulators.
After a court filing spelling out the agreement came during the last hour of trading on Wall Street, shares in Paramount added to what was already a lackluster day. They fell 3.3% on the day to finish at $8.21 after touching a 52-week low of $8.17. The stock slid another penny in after-hours trading.
Read Paramount’s agreement not to close the transaction as legal proceedings take place.
U.S. District Judge Araceli Martinez-Olguin this week granted the states a temporary restraining order pausing the transaction for 14 days to hold a hearing on whether to grant a lengthier preliminary injunction. She later extended the TRO by another 14 days, through Aug. 17. Now both sides have indicated that they want to schedule a trial.
California Attorney General Rob Bonta, in a statement on social media, called the agreement “a major victory for a free and fair economy, for the entertainment industry, for workers, for consumers, and for affordability.” He planned to share additional thoughts with the media at a Friday afternoon press briefing.
Hanging over the legal proceedings has been the prospect that Paramount would be on the hook to pay a $7 million-per-day “ticking fee” to Warner Bros. Discovery for every day that the transaction does not close past Sept. 30. The agreement opens the very real possibility that legal proceedings will extend well beyond that date. There is a $7 billion breakup fee if the deal falls apart.
In their filing in federal court on Friday, the attorneys for the parties wrote, “The transaction at issue in State of California and Writers Guild shall not close, be consummated, or otherwise be completed and Defendants will not take any steps, directly or indirectly, to integrate or consolidate their operations pursuant to the Transaction until the earlier of (1) five days after the merits determination in these matters, or (2) June 1, 2027. This stipulation and order extends to Defendants’ agents, officers, servants, employees, attorneys, and other persons who are in active concert or participation with Defendants.”
A Paramount spokesperson said, “Today’s agreement is a significant win because the result is exactly what we have sought from the outset: a direct path to a trial based on the evidence. This is the fastest and clearest way to prove that this transaction is good for competition, good for consumers, and good for creators, a conclusion dozens of competition authorities around the world have already reached. Plaintiffs’ market definitions bear no relationship to the realities of today’s marketplace and cannot withstand scrutiny. We look forward to proving our case at trial.”
The judge still has to sign off on the plan, but she had asked attorneys for the plaintiffs and defendants to meet to try to agree to a schedule.
In a joint statement on the agreement, the WGA West and WGA East said, “Paramount and Warner Bros. Discovery today agreed to what the state Attorneys General and the WGA both sought from the court: the merger will be put on hold pending the outcome of the states’ and the WGA’s cases or until June 1, 2027, whichever comes first. It remains our view that this merger is unlawful, and we will continue the fight to block it.
New York Attorney General Letitia James, representing one of a dozen seeking to block the transaction, said in a statement, “From the workers and artists who bring stories to life to the families who buy tickets at the box office, Paramount’s illegal takeover of Warner Bros. is a bad deal for all those who count on a competitive entertainment industry. Halting this merger while our case proceeds is a critical victory in our efforts to uphold the law and protect the film and television industries. I look forward to continuing our case to stop this illegal merger.”
The sides also agreed to scrap the current briefing schedule, as well as an Aug 3 hearing on the motion for a preliminary injunction. They also agreed to file a joint statement regarding the scheduling of a trial by July 31.
The state attorneys general sued on July 13 to block the transaction, claiming that it would stifle competition for wide release theatrical film distribution, anticipated big budget blockbusters, and basic cable television channel licensing. The WGA filed its own suit a day later, contending that the merger would illegally limit competition for writers services.
Paramount called the state AGs lawsuit a “flawed application of the antitrust laws and is wrong on both the facts and the law. We will vigorously defend the transaction and demonstrate that this challenge is inconsistent with sound competition policy and the competitive realities of the media marketplace.”
