Paramount targets September close for Warner deal despite state lawsuit

Paramount Skydance still plans to complete its proposed acquisition of Warner Bros. Discovery by the end of September, lead trial counsel Jeffrey Kessler told CNBC on Tuesday, even after state attorneys general sued to block the transaction. A delay beyond Sept. 30 could trigger additional payments to Warner Bros. Discovery shareholders worth about $650 million in cash value per quarter under the deal’s ticking-fee provision, CNBC reported.

The lawsuit, filed Monday by a group of state attorneys general led by California Attorney General Rob Bonta, seeks to stop the $110 billion combination on antitrust grounds, according to Bonta’s office. The states have focused on potential effects in film and pay television, two businesses where the companies have large portfolios.

The coalition also filed court papers seeking a temporary restraining order that would pause the transaction while the legal challenge proceeds, CNBC reported. Kessler told CNBC’s David Faber that the request followed Paramount’s indication that it intended to be in a position to close as soon as July 22, the date by which the company expects to have all regulatory clearances.

A temporary restraining order, if granted, would stop the deal for 14 days. CNBC reported that as many as two such orders could be issued before the states seek a preliminary injunction, which would keep the transaction from closing while the court considers the case.

Regulatory timetable remains central

The European Union is the remaining major regulatory hurdle described by Kessler. EU authorities have been reviewing the transaction and recently set July 22 as a provisional deadline, CNBC reported. Paramount has submitted concessions to address European concerns, according to Deadline.

The transaction has already been cleared by the Antitrust Division of the U.S. Department of Justice and by regulators in other jurisdictions, CNBC reported. Kessler said Paramount would be willing to follow a schedule that resolves the state challenge by early September, but said the states did not accept that approach or the July 22 closing path.

Kessler said Paramount is prepared to take the dispute to the Supreme Court if a prolonged legal block prevents the company from closing the acquisition. “The company believes strongly in this,” he told CNBC, referring to the proposed combination.

Antitrust arguments diverge

Bonta said in a Monday release that the merger would “lead to higher prices, lower quality, and less content for film and television,” and would harm movie theaters, basic cable distributors and audiences.

Kessler rejected that view in the CNBC interview. He said the deal is “pro-competitive” and argued that the entertainment industry is under pressure as consumers leave traditional pay-TV bundles and streaming competition intensifies. He said the merged company would be better positioned to compete with Netflix, Disney and Amazon’s Prime Video.

The proposed transaction would combine the Warner Bros. and Paramount film studios and bring together a broad group of pay-TV networks. Concerns in Hollywood have accompanied the deal since it was announced, CNBC reported.

Paramount Chief Executive David Ellison has said the merged studio operation would release 30 films a year, according to CNBC. Kessler said Paramount has told state attorneys general it is willing to put that commitment in writing, with litigation available later if the company fails to meet it.

This story draws on original reporting from CNBC.