Paramount Skydance Media (NASDAQ: PSKY) shares are trending Thursday after a report that U.S. states could sue to block the company's $110 billion acquisition of Warner Bros. Discovery Inc. (NASDAQ: WBD) as soon as next week. The Potential Lawsuit
According to Reuters, California Attorney General Rob Bonta has taken the lead in investigating whether the deal violates U.S. laws against mergers that would unlawfully harm competition. Two sources familiar with the matter told Reuters that states concerned about the deal's competitive impact could file suit as soon as next week.
The deal, which would combine two of Hollywood's four major studios, has drawn criticism from actors, writers and theater owners who fear job losses and fewer film releases. Theater owners have expressed concern the merger would result in narrowing consumer choice and eroding competition. Paramount CEO David Ellison has sought to assuage those concerns, saying the combined studios would release 30 movies a year.
What's at Stake
A court challenge could prove costly for Paramount. The company is already expected to carry around $80 billion in debt after the transaction closes, and Ellison has agreed to pay Warner Bros. Discovery shareholders a 25-cent-per-share ticking fee - amounting to approximately $650 million in cash each quarter - if the deal does not close before October. Any delay could also push back the $6 billion in cost cuts Paramount has said it would make after closing.
Not all lawsuits seeking to block mergers succeed, but they can delay consummation by months if a judge issues a pause order while the case plays out. Given that multiple states are coordinating, Reuters noted the timeline for filing could still change.
Paramount Shares Edge Lower
PSKY Price Action: At the time of publication, Paramount shares are trading 3.38% lower at $9.42, according to data from Benzinga Pro.