/https://media.cnbc.com/dims/origin/108343257/Spider-Man-Brand-New-Day.jpg "Spider-Man Smashes Box Office Records with ‘Brand New Day’ Preview Haul")
Paramount Skydance has agreed to delay its acquisition of Warner Bros. Discovery until June 2027 due to a legal challenge from state attorneys general concerned about antitrust issues. This extension could add billions to the deal’s cost through a ‘ticking fee’ mechanism.
Despite prior antitrust clearances from the DOJ and European regulators, state officials are pushing back, arguing the merger would harm competition and jobs. Paramount, however, views the delay as a positive step towards proving the deal’s benefits in court.
Paramount Skydance has agreed to postpone its proposed acquisition of Warner Bros. Discovery until June 2027, a significant extension driven by ongoing legal challenges. This delay will likely increase the overall cost of the transaction.
The merger faced a major hurdle last week when a coalition of state attorneys general, led by California's Rob Bonta, filed a lawsuit aiming to block the deal, citing antitrust concerns. A judge subsequently issued a temporary restraining order, enforcing an immediate pause.
Paramount had consistently indicated its intention to finalize the acquisition by the end of September. However, the new agreement stipulates that the completion of the acquisition will not occur before the court rules on the states' claims or by June 1, 2027, whichever comes first.
In response, Paramount released a statement on Friday, hailing the agreement as a "significant win." The company stated, "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." Paramount expressed confidence that the plaintiffs' market definitions are unrealistic and look forward to proving their case in court.
Shares of Paramount Skydance experienced a 3% decline in afternoon trading on Friday following the announcement.
The agreement introduces a "ticking fee" for Warner Bros. Discovery shareholders, payable from September 30th onwards, which increases with the duration of the delay. This fee is set at an additional 25 cents per share per quarter, potentially accumulating to approximately $650 million in cash value each quarter. A delay extending to June 2027 could add roughly $1.7 billion to the total deal price.
Should the merger ultimately be terminated, Paramount would be obligated to pay WBD a $7 billion breakup fee.
The proposed combination, announced in February, saw David Ellison's company outbid Netflix. The $110 billion deal aims to unite two major Hollywood studios, popular streaming services, and a portfolio of television networks.
While the U.S. Department of Justice's antitrust division and European antitrust regulators have granted their approval for the merger, U.S. state officials remain concerned about potential reductions in competition and job losses within the film industry.
Attorney General Rob Bonta reiterated these concerns, stating, "Our argument against this illegal merger is straightforward: When too few corporations have too much power in markets central to American life, it makes things more expensive, and it makes things worse." He expressed optimism about the outcome, adding, "Today's agreement is great news for audiences, movie theaters, and the many people who write, build, and create the art, news, and entertainment so many of us enjoy. 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."
