Paramount says it will take the Warner Bros merger to the Supreme Court if states block the deal

Paramount Skydance is still aiming to close its roughly $110 billion acquisition of Warner Bros Discovery by the end of September despite a lawsuit filed by 12 state attorneys general seeking to block the deal on antitrust grounds. Jeffrey Kessler, Paramount’s lead trial counsel, told CNBC on Tuesday that the company is prepared to take the matter to the Supreme Court if it faces a prolonged blockade. The coalition, led by California Attorney General Rob Bonta, filed the suit in federal court on Monday and followed it with a motion for a temporary restraining order later that evening.

The lawsuit argues that combining two of Hollywood’s five major film distributors and two of its five major basic cable channel owners would substantially lessen competition across theatrical distribution, cable programming, and the broader entertainment industry. Bonta said in a statement that the merger would lead to higher prices, lower quality, and less content for audiences. The deal had already received clearance from the Justice Department’s Antitrust Division, which concluded in June that the transaction was unlikely to harm competition, making the state-level challenge a direct rebuke of the federal finding.

Kessler told CNBC’s David Faber that Paramount had indicated its intention to close the deal as early as July 22, the date by which the European Union is expected to issue its own regulatory decision. Paramount recently submitted concessions to the EU to address remaining concerns. Kessler said the company offered the states two alternatives, an immediate close or an orderly judicial schedule that would resolve the matter by early September, but the states rejected both.

The financial pressure on Paramount is real. Under the merger agreement, if the deal has not closed by September 30, Paramount must pay Warner Bros Discovery shareholders a ticking fee worth roughly $650 million per quarter until closing. A temporary restraining order, if granted, would pause the transaction for 14 days, and up to two could be issued before the states seek a preliminary injunction that would put the deal on hold for the duration of the litigation.

Kessler argued the merger is pro-competitive rather than anti-competitive, noting that the entertainment industry is in deep trouble as consumers flee pay TV bundles and streaming competition intensifies. He said the combined company would be able to compete directly with Netflix, Disney, and Amazon’s Prime Video. CEO David Ellison has promised the merged entity would release 30 films per year, and Kessler said Paramount is willing to put that commitment in writing.

The deal has already cleared the DOJ and multiple international regulators, and Paramount has been unifying its streaming technology in preparation for absorbing HBO Max after closing. Whether the state attorneys general can delay the transaction long enough to trigger the ticking fee, or block it entirely, will likely depend on how quickly the federal court in Sacramento acts on the restraining order request.