The Clock is Running on Paramount's Biggest Deal
A judge didn't kill the merger. She may have made it negotiable.
A federal judge has temporarily blocked Paramount and Warner Bros Discovery from closing the deal while she considers whether to issue a preliminary injunction. The immediate delay is only two weeks, with the next hearing scheduled for August 3.
If the court decides the merger should remain on hold while the states’ antitrust lawsuit proceeds, the calendar starts to matter.
The merger agreement calls for Paramount to begin paying Warner Bros. Discovery shareholders a “ticking fee” if the deal remains unfinished beyond September 30. That’s about $7 million every day the transaction remains in limbo.
What happens now? One possibility is that Paramount simply wins in court. Another is that the companies convince the judge the states haven’t met the standard for a preliminary injunction.
But there’s a third possibility that suddenly looks more attractive than it did a week ago: Settlement.
When delays start carrying a price tag measured in millions of dollars a day, companies often become more flexible. Even for a billionaire, that starts to add up.
California Attorney General Rob Bonta argues the merger combines too much power in film distribution, cable programming and television production into one company.
If that’s the concern, structural changes become one possible path. The most discussed candidate is CNN.
There’s been speculation that David Ellison would prefer not to own the network long-term anyway. CNN has been viewed inside Wall Street as a business that could eventually be spun off or sold after closing. A court fight that threatens hundreds of millions of dollars in delay costs could accelerate that conversation.
And it’s doable. Comcast spun off MSNBC into a separate company. So it’s not unprecedented for a major cable news network to stand on its own.
Would selling CNN satisfy the states? Probably not by itself.
The lawsuit reaches well beyond news. It focuses heavily on movie studios, cable programming and bargaining power throughout the entertainment business. CNN is only one piece of Warner Bros. Discovery.
But if Paramount decides that giving up one asset saves billions in delay costs and preserves the rest of a $110 billion deal, that calculation starts looking a little different.
On the other hand, Ellison may decide the company can win outright and refuse to negotiate anything. After all, he’s got the Trump administration on his side, and it has shown it’s willing to push people around to get what it wants.
Looks like I’ll be buying lots more popcorn.
If this is your kind of rabbit hole, check out the latest Archer & Feldman podcast. Our guest is Los Angeles radio legend Bill Handel of KFI. We spend an hour talking about Paramount, iHeart, radio, mergers, layoffs, and where the media business goes from here.
Paramount’s proposed takeover of Warner Bros. Discovery is now expected to face a delay of many months and potentially extend into 2027. Paramount has agreed not to complete the merger until an antitrust trial takes place or June 1, 2027—whichever comes first—after legal challenges from a coalition of 12 state attorneys general and the Writers Guild of America. Although federal regulators have approved the deal and the European Commission has granted conditional clearance, the California lawsuits remain its principal obstacle. The agreement abandons Paramount’s original goal of taking control of Warner by the end of September and could trigger quarterly payments to WBD shareholders if the transaction remains unfinished after September 30.