A federal judge in California issued a temporary restraining order Monday blocking Paramount and Warner Bros. Discovery from closing their $81 billion merger, delivering the deal's first major regulatory setback.
The 14-day order gives the court time to consider a preliminary injunction requested by California and 11 other states, which are challenging the combination on antitrust grounds. If the preliminary injunction is granted after a hearing scheduled for Aug. 3, the companies would be barred from closing while the lawsuit proceeds.
California Attorney General Rob Bonta hailed the decision as “a critical first win” in the states’ effort to stop the megamerger. “We have a full tank of gas, the law on our side, and look forward to continuing to make our case,” Bonta said.
The ruling means Paramount will miss its goal of closing the transaction by the end of July. The states argue the merger would lead to higher prices, lower quality, and reduced content for theaters, pay-TV distributors, and consumers.
Until now, the deal had faced little opposition from regulators. The U.S. Justice Department approved it last month, stating it would enhance competition across the media and entertainment sector. It has also received clearance from regulators in Australia and China, though approvals are still pending in the U.K. and European Union.
If the litigation drags past Sept. 30, Paramount will owe Warner shareholders a quarterly “ticking fee” of 25 cents per share — roughly $650 million every three months — until the deal closes.
Paramount has called the states’ lawsuit “based on a misrepresentation of competition in the entertainment industry today.”