Paramount and Warner Bros. expect a delay in closing the deal

By Brian Stelter, CNN

(CNN) — Executives involved in the pending Paramount–Warner Bros. Discovery deal expect that a judge will hit pause on the takeover plan in the coming days.

Officially, it’s anyone’s guess what the court will do in response to a request by 12 state attorneys general for a temporary restraining order (TRO).

Unofficially, people close to the matter anticipate that the TRO will be granted, putting the mega-merger in a two- or three-week timeout.

Those people, granted anonymity to speak candidly about the state of play, remain bullish that Paramount will prevail in the end. “The deal will get done one way or another,” one of the executives said.

But the earlier prospect that Paramount might take control of Warner next week has been all but extinguished by the state attorneys general’s action.

The states filed a lawsuit on Monday charging that the merger would violate antitrust law and must be stopped. The suit created additional uncertainty about the future ownership of CNN and other assets owned by Warner Bros. Discovery (WBD).

Ever since it prevailed over Netflix in a bidding war last February, Paramount has said it anticipates completing the merger by the end of September.

Behind the scenes, Paramount aimed for July, believing that all the necessary approvals might be in place by now. The company noted in a recent statement that “numerous antitrust authorities around the world” have already signed off, concluding that “this transaction creates a stronger competitor against dominant streaming and technology platforms.”

Those authorities included the US Department of Justice, which approved the merger last month without any strings attached.

Some of the 12 state attorneys general, all of whom are Democrats, have questioned whether the swift DOJ approval was the result of President Donald Trump’s cozy relationship with the family that owns Paramount.

And the states have said that they are bringing antitrust lawsuits on behalf of consumers because the federal government is failing to do so.

The states’ lawsuit is one of the last remaining roadblocks for Paramount and WBD. Another potential challenge is in the United Kingdom, where Culture Secretary Lisa Nandy has said she is “minded to intervene” in the merger.

In the EU, Paramount has offered concessions to secure approval from the European Commission, with a July 22 deadline for a decision.

Paramount employees had talked about the merger potentially taking effect right afterward. But now the states are standing in the way.

The attorneys general are seeking a TRO to prevent the companies from completing the merger while the legal process is underway. A judge has scheduled a hearing to consider the request on Friday.

A separate consumer lawsuit against the deal, filed on behalf of Paramount+ subscribers, is also winding its way through the courts, and the two cases will now be linked.

On Tuesday, the Writers Guild of America also filed suit in the Northern District of California, arguing that the merger would hurt its members by shrinking the number of Hollywood buyers for TV shows and movies.

Paramount responded, “A ​combined Paramount–WBD will have the scale and resources to reverse the current trends in our industry and expand opportunities for writers, not ‌shrink ⁠them.”

If a TRO is granted by a judge in the coming days, the two sides will then spar over a preliminary injunction, which would put the deal on hold for months.

Speaking on CNBC on Tuesday, Paramount’s lead trial counsel, Jeffrey Kessler, said the company still expects to complete the merger by the end of September.

Paramount has banked on its ability to do so: A deal-sweetener kicks in on October 1, adding 25 cents per WBD share per quarter to the cost of the deal until it is completed. The so-called “ticking fee” could cost Paramount hundreds of millions of dollars, creating an even greater financial incentive to get the deal done swiftly.

Kessler said Paramount would “absolutely” appeal if a judge issues a ruling putting the deal on hold.

“The company believes strongly in this, and they would take this up to the Supreme Court if they had to,” Kessler said.

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