US states are threatening to sue as early as next week to block Paramount's $110 billion acquisition of Warner Bros. Discovery, citing concerns that the merger will harm competition. California Attorney General Rob Bonta is spearheading the investigation into potential violations of US anti-merger laws. This legal action could significantly delay the deal, potentially increasing costs for Paramount, which has already agreed to pay Warner Bros. Discovery shareholders a 25-cent-per-share "ticking fee," amounting to approximately $650 million cash each quarter, if the deal does not close before October.
Opposition to the merger is widespread, with Hollywood actors, writers, and theater owners expressing fears of job losses, fewer film productions, and reduced consumer choice. The combined entity would bring together two of Hollywood's four major studios, encompassing major streaming platforms, studios, and TV networks with franchises like *Game of Thrones*, *Harry Potter*, *Mission: Impossible*, and *Top Gun*. Despite this, Paramount CEO David Ellison maintains that the merger will enhance competition and plans for the combined film studios to release 30 movies annually.
The combined company is projected to carry nearly $80 billion in debt, a sum Moffett Nathanson described as "staggering," with net debt estimated at 6.5 times annual EBITDA post-acquisition. This substantial debt load, coupled with persistent streaming losses and volatile advertising markets, is expected to constrain strategic decisions, despite Ellison's pledges against asset sales or content budget cuts. Delays caused by potential lawsuits could further escalate costs and complicate the $6 billion in cost cuts Paramount aims to achieve after the deal closes.
While the Department of Justice (DOJ) approved the merger earlier without requiring divestitures, suggesting an easier path through federal antitrust scrutiny due in part to CEO David Ellison's father's (Larry Ellison) political connections, states like Oregon are independently seeking delays and new information. Oregon's Attorney General Dan Rayfield requested a Multnomah County court to compel Paramount to submit records and postpone the deal by 60 days for state review, pushing back the finalization date to at least July 22. Other international approvals have been granted by Kuwait, Austria, and Australia, but concerns have also been raised by the UK's media regulator regarding news media plurality.
