Paramount-Warner Bros. Discovery merger likely to face court-imposed pause

Executives involved in the pending Paramount–Warner Bros. Discovery merger anticipate that a judge will grant a temporary restraining order (TRO) filed by 12 state attorneys general, putting the transaction on hold for two to three weeks. The states filed the lawsuit on Monday, alleging the deal would breach antitrust law and could affect ownership of assets such as CNN. A hearing on the TRO request is scheduled for Friday, and a separate consumer suit by Paramount+ subscribers will be linked to the case.

Paramount had previously expected to close the merger by the end of September, after receiving approvals from several antitrust authorities, including the U.S. Department of Justice. However, the states, all Democrats, argue that the DOJ’s swift approval may have been influenced by political connections and contend that federal regulators have not adequately protected consumers.

The companies also face potential challenges in the United Kingdom, where the Culture Secretary has indicated a willingness to intervene, and in the European Union, where Paramount has offered concessions ahead of a July 22 decision deadline.

"The deal will get done one way or another," said an executive involved in the negotiations.

"A combined Paramount–WBD will have the scale and resources to reverse the current trends in our industry and expand opportunities for writers, not shrink them," Paramount said in response to a Writers Guild lawsuit.

"The company believes strongly in this, and they would take this up to the Supreme Court if they had to," lead trial counsel Jeffrey Kessler told CNBC.

If a TRO is issued, the parties would likely contest a preliminary injunction that could extend the delay for months. Paramount faces a financial incentive to close the deal quickly, as a contractual provision adds a quarterly fee of $0.25 per WBD share after October 1 until the merger is completed.