Paramount delays Warner Bros. Discovery merger amid legal challenge

Paramount has agreed to delay its planned merger with Warner Bros. Discovery (WBD) as it faces antitrust lawsuits from 12 US states and the Writers Guild of America.

The court papers filed Friday state that the company will not complete the $111 billion deal until at least five days after the legal cases are heard, or until June 1, 2027, whichever comes first.

The delay comes after a group of states led by California won a temporary court order earlier this week blocking the merger for 28 days. The states argue the deal would reduce competition in the cable TV and movie industries.

A court hearing that had been scheduled for August 3 has now been canceled. The Writers Guild of America has also withdrawn its request for a preliminary injunction. Both parties can file new requests later if needed.

If the merger closes after September 30, Paramount will have to pay Warner Bros. Discovery shareholders a daily "ticking fee" of just under $7 million. If the deal falls apart completely, Paramount would owe WBD a $7 billion breakup fee.

California Attorney General Rob Bonta welcomed the delay.

"Our argument is simple," Bonta said. "When too few companies control important markets, prices go up and competition suffers."

He added that the agreement is good news for audiences, movie theaters and people working in the entertainment industry, and said the state looks forward to continuing its case in court.

The merger has already been approved by the US Department of Justice. The European Commission also approved the deal earlier this week, on the condition that Paramount ends its United International Pictures distribution partnership with Universal Pictures.