Paramount Skydance’s top antitrust attorney told a judge Friday that David Ellison’s company would voluntarily delay its proposed $111-billion takeover of Warner Bros. Discovery at least until mid-August amid a legal challenge brought by 12 state attorneys general.
The states, led by California Atty. Gen. Rob Bonta, have asked a judge to issue a temporary restraining order that would prevent Paramount from finalizing its deal as the court battle ramps up. Paramount made the pledge in hopes of avoiding such a ruling that would tie its hands — and give the states an early win in the litigation.
Federal District Judge Araceli Martínez-Olguín said she would decide by Wednesday whether to issue a restraining order.
Friday’s hearing in Oakland opened the first chapter in the fight over the blockbuster deal that both sides agree would dramatically reshape Hollywood. Two century-old film studios — with rights to Harry Potter, Batman, “The Big Bang Theory” and “Game of Thrones” — would be combined, and HBO and CNN would come under new ownership.
Antitrust attorney James H. Weingarten, of the Washington law firm Millbank, represents California and the other states. He told the judge it would be impossible to untangle the two companies if they are allowed to combine.
“If this merger is allowed to close … the harms begin,” Weingarten said. “The job losses, the synergies — that’s the fancy word for ‘we’re going to save money and there might be job cuts.’ All of that process starts rolling.”
Bonta filed the suit Monday, alleging the proposed merger — the largest in Hollywood in decades — would violate the U.S. Clayton Antitrust Act, a 112-year-old law to prevent mergers that weaken competition and raise costs for consumers.
The lawsuit alleges antitrust violations in three markets where the two companies currently compete: wide-release films, potential blockbuster movies and cable television, where the combined entity would own more than 50 cable channels.
Paramount shares fell 4.3% to $8.75 on Friday. Warner stock slipped 1.5% to $26.87 — below Paramount’s offer of $31 a share.
More than two dozen lawyers attended Friday’s hearing, including from Colorado, Oregon, Washington and New York who came to support California, which is leading the case.
Paramount, represented by antitrust lawyer Jeffrey L. Kessler, argued a temporary restraining order was not necessary. The two sides should instead focus on the next big step — whether the judge issues a preliminary injunction, he said. Such a ruling could delay the deal for months.
Kessler said Paramount should be allowed a hearing to defend against a preliminary injunction by the end of August. The company wants to wrap up the litigation by late September to avoid a higher payout to Warner Bros. Discovery shareholders.
In a show of confidence earlier this year, Paramount offered Warner Bros. Discovery shareholders a “ticking fee” of 25 cents for every quarter after Sept. 30 — until the deal was done. Such payments would cost Paramount more than $7 million a day, which Kessler called a “massive injury.”
Paramount would also have to pay Warner a $7-billion breakup fee should the deal fall apart.
Kessler argued the states had not made a sufficient case that competition would be harmed. “We don’t think they’ve come close to jumping through that hurdle,” Kessler said.
Earlier this year, Kessler represented the state attorney generals in their winning case against Live Nation Entertainment. A jury found that Live Nation, which owns Ticketmaster, operated as a monopoly. This time, Kessler is representing corporate interests.
Prominent Los Angeles litigator Daniel Petrocelli is representing Warner Bros. Discovery.
The case was assigned to Martínez-Olguín Wednesday after Paramount requested an earlier judge be removed because he formerly worked as a labor attorney.
Martínez-Olguín said she inherited the case because she was already overseeing another lawsuit dealing with the merger — not because Paramount had agitated for a change.
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