Paramount says it will take Warner Bros merger to the Supreme Court if states block the deal

Paramount Skydance is still aiming to close its roughly $110 billion acquisition of Warner Bros. Discovery by the end of September despite a lawsuit filed by 12 state attorneys general seeking to block the deal on antitrust grounds. Jeffrey Kessler, Paramount’s lead trial attorney, he told CNBC Tuesday that the company is willing to take the matter to the Supreme Court if it faces a prolonged blockade. The coalition, led by California Attorney General Rob Bonta, filed the lawsuit in federal court on Monday and later that night filed a motion for a temporary restraining order.

The lawsuit contends that combining two of Hollywood’s top five film distributors and two of its top five basic cable channel owners would substantially reduce competition in theatrical distribution, cable programming and the entertainment industry overall. Bonta said in a statement that the merger would lead to higher prices, lower quality and less content for audiences. The deal had already been cleared by the Justice Department’s Antitrust Division, which concluded in June that the transaction was unlikely to harm competition, making the state-level challenge a direct rebuke of the federal finding.

Kessler told CNBC’s David Faber that Paramount had indicated its intention to close the deal as early as July 22, when the European Union is expected to issue its own regulatory decision. Paramount recently submitted concessions to the EU to address remaining concerns. Kessler said the company offered the states two alternatives, an immediate shutdown or an orderly court schedule that would resolve the matter by early September, but the states rejected both.

The financial pressure on Paramount is real. Under the merger agreement, if the deal has not closed by September 30, Paramount must pay Warner Bros. Discovery shareholders a fee of approximately $650 million per quarter until closing. If a temporary restraining order is granted, it would suspend the transaction for 14 days, and up to two could be issued before the states seek a preliminary injunction that would suspend the deal for the duration of the litigation.

Kessler argued that the merger is pro-competitive rather than anti-competitive, noting that the entertainment industry is in serious trouble as consumers flee pay-TV packages and Streaming competition intensifies. He said the combined company could compete directly with Netflix, Disney and Amazon’s Prime Video. CEO David Ellison has promised that the merged entity would release 30 films per year, and Kessler said Paramount is willing to put that commitment in writing.

The deal has already been approved by the Department of Justice and multiple international regulators, and Paramount has been unifying your streaming technology in preparation to absorb HBO Max after the shutdown. Whether state attorneys general can delay the transaction long enough to trigger the ticking fee, or block it entirely, will likely depend on how quickly the federal court in Sacramento acts on the restraining order request.