US states poised to sue next week to block Paramount-Warner Bros merger: Here’s why

A coalition of US states is preparing a lawsuit to block Paramount’s Skydance $110 billion acquisition of Warner Bros.Discovery, arguing the deal will hurt competition and could sue to block the deal as soon as next week.

The significant deal which combines two of Hollywood's four major studios has generated backlash from actors, writers and others in Hollywood who fear job losses.

Theater owners also contest the amalgamation of the Warner Bros movie studio with Paramount Pictures and have voiced concern that the merger would yield fewer movies, reducing alternatives and eroding competition.

In this connection, California Attorney General Rob Banta has taken charge of the investigation into whether the deal violates US laws against mergers that would slow down fair competitive processes.

Paramount has further clarified that joining forces with Warner Bros would allow the media company to navigate growing market rivalry for audiences, talent and investment. CEO David Ellison has sought to mitigate the concerns of theater owners, saying the combined film studios would release 30 movies a year.

According to Ellison, if the deal is delayed because of a court challenge, costs could spiral for Paramount, which is already expected to carry around $80 billion in debt after the agreement is concluded.

Paramount has agreed to pay Warner Bros. Discovery shareholders a 25 percent ticketing fee, aggregating roughly to about $650 million each quarter if the deal does not close before October.

According to analysts, Paramount's political ties and other factors gave it an expedited regulatory pathway from federal antitrust watchdogs in the US. The Paramount CEO’s billionaire Oracle co-founder Larry Ellison has fostered connections with President Trump.

Notably, multiple states are coordinating, so the timeline for filing the lawsuit could change.

Furthermore a court order could force Paramount and Warner Bros Discovery to hold their assets separate, delaying the $6 billion in cost cuts that Paramount has said it would make after the conclusion of the contract.