A blockbuster merger just got a lot messier. Paramount Skydance, having won a bidding war against Netflix for Warner Bros. Discovery in February, has agreed to delay the merger's completion until June 2027 at the latest, or until a court gives its blessing, whichever happens first.
The reason? Several state attorneys general, spearheaded by California's Rob Bonta, filed a lawsuit claiming the merger would curb competition and eliminate jobs in the film industry. A federal judge issued a temporary restraining order on Monday, which forced a near-term delay. The U.S. Department of Justice already cleared the merger in June, but the states are pressing ahead.
Paramount called the delay a "significant win" in a statement. The company argued that the lawsuit's market definitions "bear no relationship to the realities of today's marketplace." Bonta saw it differently. Bonta said the deal would make things "more expensive" and "worse" for American consumers.
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The revised closing date is June 1, 2027, whereas the initial plan was to complete the deal by the end of September. So if the court does not rule before then, the deal could sit in limbo for a multi-month delay.
Paramount agreed to one painful financial term to keep the deal alive. Starting after September 30, the company must pay Warner Bros. Discovery shareholders a "ticking fee" of 25 cents per share per quarter for every three-month delay.
If the delay stretches all the way to June 2027, the ticking fee alone would add about $1.7 billion to the total deal price. The whole acquisition is already worth around $110 billion. And if the merger falls apart entirely, Paramount would owe Warner Bros. a breakup fee of $7 billion.
The ticking fee is designed to compensate Warner Bros. shareholders for the delay, but it also increases the overall cost of the deal substantially. If the merger goes through, Paramount Skydance will have paid a premium beyond the original $110 billion price tag. Meanwhile, the state lawsuit represents a rare instance of state-level antitrust action in the media industry, as federal approval had already been obtained.
The lawsuit, led by California Attorney General Rob Bonta, argues that the combined entity would dominate streaming and theater distribution, reducing consumer choice. While the Department of Justice had already approved the merger, the state-level action introduces significant uncertainty. The ticking fee structure is designed to compensate Warner Bros. shareholders for the delay, but it also puts pressure on Paramount to resolve the legal hurdles quickly.
If the deal collapses, the $7 billion breakup fee would be one of the largest in media history. Both sides are now preparing for a court battle that could define the future of the entertainment industry.
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