Paramount still plans to close its proposed acquisition of Warner Bros. Discovery by the end of September despite a lawsuit filed by state attorneys general, lead trial counsel Jeffrey Kessler told CNBC on Tuesday. The company aims to close as early as July 22 when it expects to have all regulatory clearances, including from the European Union which set that date as a provisional deadline. State attorneys general led by California's Rob Bonta filed a lawsuit on Monday aimed at blocking the merger due to antitrust concerns, and later filed court papers seeking a temporary restraining order to put the deal on hold. Kessler stated the company is prepared to bring the matter to the Supreme Court if faced with a prolonged blockade. The proposed acquisition has already received approval from the U.S. Department of Justice Antitrust Division.
State Attorneys General File Lawsuit and Restraining Order
On Monday, a group of state attorneys general led by California's Rob Bonta filed a lawsuit aimed at blocking the merger due to antitrust concerns. Later in the day, the group filed court papers seeking a temporary restraining order to put the deal on hold so that legal proceedings could move forward. If granted, the temporary restraining order would pause the deal for 14 days. Up to two temporary restraining orders could be granted before the coalition seeks a preliminary injunction. Kessler told CNBC on Tuesday the temporary restraining order came after Paramount indicated its intention to close as early as July 22.
Bonta said in a release on Monday that the merger would "lead to higher prices, lower quality, and less content for film and television, harming movie theaters, basic cable distributors, and ultimately, audiences on every sofa and movie theater seat in the U.S."
European Union Sets July 22 Regulatory Deadline
The European Union has been reviewing the deal for approval and recently set July 22 as a new provisional deadline. Paramount recently submitted concessions to the EU as it looks to smooth concerns regarding the deal. Kessler stated on Tuesday that the company expects to have all regulatory clearances by July 22. The proposed acquisition that would bring together the two film studios of Warner Bros. and Paramount, as well as a portfolio of pay TV networks, has already received approval from the Antitrust Division of the U.S. Department of Justice, as well as other global jurisdictions.
Paramount Faces $650 Million Quarterly Ticking Fee Past Sept. 30
A long delay could be costly for Paramount. As part of the deal, Paramount has agreed to pay a ticking fee, meaning that if the closing goes past Sept. 30, Paramount would pay additional fees to WBD shareholders per quarter until closing. That fee would equal roughly $650 million in cash value per quarter. Kessler said on Tuesday the company doesn't expect the temporary restraining order to delay the deal to that point. He stated that the company could work out a schedule to get all matters decided by early September, which would be acceptable to Paramount if an orderly procedure could be created.
Paramount Commits to 30 Films Annually Post-Merger
Paramount CEO David Ellison has promised that once merged, the film studios would together put out a slate of 30 movies annually. Kessler said that Paramount has told state attorneys general the company is willing to put in writing that it would commit to the 30 films, and if it doesn't happen, litigation could then take place. Kessler told CNBC that "anybody who knows the entertainment industry knows it is in deep trouble," noting widespread challenges as consumers flee pay TV bundles and competition among streaming giants like Netflix intensifies. He added that the merger would create a competitor that could "go toe to toe with a Netflix or Disney or Prime."
FAQ
What is the current status of the Paramount-Warner Bros. Discovery merger lawsuit?
State attorneys general led by California's Rob Bonta filed a lawsuit on Monday aimed at blocking the merger due to antitrust concerns. The group also filed court papers seeking a temporary restraining order to pause the deal. Paramount's lead trial counsel Jeffrey Kessler stated on Tuesday that the company is prepared to bring the matter to the Supreme Court if faced with a prolonged blockade.
When does Paramount plan to close the Warner Bros. Discovery acquisition?
Paramount still plans to close the acquisition by the end of September. The company aims to close as early as July 22 when it expects to have all regulatory clearances, including from the European Union which set that date as a provisional deadline. The proposed acquisition has already received approval from the U.S. Department of Justice Antitrust Division.
What financial penalty does Paramount face if the merger is delayed past Sept. 30?
As part of the deal, Paramount has agreed to pay a ticking fee if the closing goes past Sept. 30. Paramount would pay additional fees to WBD shareholders per quarter until closing. That fee would equal roughly $650 million in cash value per quarter.
