(CNN) — Paramount says its takeover of CNN’s parent company, Warner Bros. Discovery, will be delayed for many months, and potentially well into 2027, due to pending lawsuits by state attorneys general and the Writers Guild of America.
Paramount said in a Friday afternoon court filing that it has agreed not to complete the mega-merger until an antitrust trial takes place, or until June 1, 2027, whichever comes first.
The current Paramount–Warner merger agreement expires on March 4, and is subject to an automatic extension through June 4, 2027.
Friday’s announcement blows up Paramount’s original plan to take control of Warner by the end of September. The delay was celebrated by critics of the deal. Shares in both Paramount and WBD slumped on the news.
The delay does not preclude all the parties involved from striking a settlement deal that would clear the path for the merger.
But for the time being, at least, the deal uniting two of Hollywood’s biggest studios is in a deep freeze.
Friday’s agreement is the result of discussions between the lawyers for all the parties. It means there will no longer be an August 3 hearing on the states’ request for a preliminary injunction, and it withdraws the Writers Guild’s similar motion.
Lawyers for Paramount reached the conclusion that the plaintiffs would likely prevail at the preliminary injunction stage, an executive involved in the matter told CNN.
Thus, the source said, Paramount believes it’s better for the company to skip that stage and seek a speedy jury trial.
Judge Araceli Martínez-Olguín, who is overseeing the case, quickly approved the agreement.
According to court filings, the parties will now work out timing for a trial on the underlying antitrust claims, with a proposed schedule due next Friday.
Paramount is saying “let’s go straight to trial in California District Court,” analyst Rich Greenfield of Lightshed Research said. Greenfield noted that “even if Paramount loses in District Court, this would accelerate the time frame for an appeal to the Ninth Circuit Court and potentially to the Supreme Court in 2027.”
In a statement, a Paramount spokesperson said, “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. 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. Plaintiffs’ market definitions bear no relationship to the realities of today’s marketplace and cannot withstand scrutiny. We look forward to proving our case at trial.”
The delay is potentially costly for Paramount. Under the terms of the merger agreement, the company will begin to owe Warner Bros. Discovery shareholders a 25-cent-per-share “ticking fee” each quarter the transaction remains incomplete after September 30.
The U.S. Department of Justice approved the merger last month, and the European Commission granted conditional approval on Wednesday. The EU approval required Paramount to make several concessions, including exiting a film distribution joint venture with Universal in Europe.
But the states AGs’ lawsuit remains the deal’s biggest obstacle. The coalition of 12 state attorneys general has argued that the merger would reduce competition.
The-CNN-Wire
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