Paramount Skydance Corp and Warner Bros Discovery Inc have agreed not to close their blockbuster $110 billion deal until June, unless the legal fight over the merger is resolved sooner.
The two sides agreed that they wouldn’t close the deal until the earlier of five days after a ruling in the case or June 1, according to a filing in a lawsuit by California and other states seeking to stop the deal. US District Judge Araceli Martínez-Olguín in Oakland, California, approved the delay.
Paramount shares dropped Friday as much as 3.8 percent on the news and closed at $8.21, its lowest level on record.
The attention now turns to setting a date for a trial over whether the deal will be permanently blocked.
A lengthy pause could be expensive for Paramount, which has agreed to pay roughly $7 million per day to Warner Bros shareholders beginning Oct 1 until the deal is closed. That could tee up more than $1.6 billion in daily fees by June.
The companies have until June 4 to close the deal, according to the merger agreement, before either side can back out. If the deal is abandoned at that time, Paramount will owe another $7 billion to Warner Bros.
Tremendous uncertainty
The potentially lengthy extension creates tremendous uncertainty for Hollywood and some of its most storied properties. The takeover unites two Hollywood studios behind legendary films from Casablanca and Harry Potter to Mission: Impossible, two major news networks in CNN and CBS and the streaming powerhouse HBO Max and dozens of cable networks.
The two sides said they would submit their proposals for a trial by the end of July, with Paramount expected to push for a date that will give it a decision well in advance of the June deadline. The states have previously asked for a trial in April. The judge will ultimately decide the schedule but will likely give substantial weight to any agreement between the two sides.
“We are eager to continue to make our case in court and celebrate another tremendous win in our effort to ensure this unlawful merger never sees the light of day,” California Attorney General Rob Bonta said in a statement.
‘Significant win’
A Paramount spokesperson said in a statement, “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.”
Paramount was always going to get a trial; it’s just a matter of when.
The judge had a set an Aug 3 hearing on the states’ request for a preliminary injunction, but that has now been canceled.
The company has been pushing for a three-day evidentiary hearing with testimony from multiple witnesses to be held in August.
Netflix, Amazon
Paramount has said repeatedly the deal will survive a legal challenge if the company is allowed to present evidence showing the merger will give Hollywood much-needed competition and allow it to better compete against tech giants like Netflix Inc. and Amazon.com Inc.
The states have said a multiday hearing in August is too rushed and would not give them time to prepare.
In the complaint they filed this month, the states argued the deal would harm competition in theatrical film distribution and basic cable markets. A separate suit by the Writers Guild of America contends the tie-up will diminish competition for the services of screenwriters.
