U.S. states may file a lawsuit next week to impede Paramount's $110 billion acquisition of Warner Bros.

      A coalition of US states might file a lawsuit as early as next week to prevent Paramount’s $110 billion takeover of Warner Bros. Discovery, according to two individuals familiar with the situation, as reported by Reuters. This development creates a new challenge to a merger that federal regulators have already approved.

      The threat comes a few weeks after the Justice Department greenlit the merger with no conditions, and it might still postpone one of the largest consolidations in Hollywood in years. The states are worried that the merger could negatively impact competition, as noted in a Reuters report by Dawn Chmielewski and Jody Godoy on July 8. The specific aspects of competition that concern officials were not detailed in the sources.

      Advocacy groups and some state regulators have warned that subscription prices for streaming services could increase, and that the newly merged entity might lead to job cuts and a reduced variety of films, news, and other content. These apprehensions mirror the objections raised by actors, writers, and theater owners since the announcement of the acquisition, with cinema operators particularly arguing that a combined studio may produce fewer films.

      The merger would unite two of the four top studios in Hollywood, and its size has attracted the attention of regulators. According to the terms, Paramount is offering $31.00 per share in cash for Warner Bros. Discovery, valuing the acquisition at approximately $110 billion, including debt.

      California has taken the initiative in this matter. Attorney General Rob Bonta is investigating whether the transaction breaches US laws against mergers that unlawfully harm competition, and in early June, Reuters reported that California, New York, and other states were preparing a joint lawsuit.

      This state-level action represents a broader shift, with attorneys general intensifying their examination of large mergers as federal antitrust authorities adopt a more lenient approach. A spokesperson from Bonta’s office declined to comment, and Paramount has not responded to Reuters at this time.

      A legal challenge would have significant costs for Paramount, which is expected to bear around $80 billion in debt once the deal is finalized. Any delay would only add to that financial pressure. CEO David Ellison, son of Oracle co-founder Larry Ellison, has already agreed to pay Warner Bros. Discovery shareholders a 25-cent-per-share “ticking fee” if the agreement does not finalize by October, equating to about $650 million in cash each quarter. This clause provides strong motivation for both parties to complete the merger swiftly.

      The deal has progressed quickly. Paramount Skydance, led by Ellison, emerged victorious in a bidding competition for Warner Bros. Discovery after Netflix withdrew, and the streaming competitor later authorized a $25 billion share buyback as it refocused on its own plan.

      Federal approval was granted last month after the Justice Department concluded an eight-month review, determining that the merger “is not likely to harm competition or American consumers.” State attorneys general still hold the right to sue to prevent a deal even after it has received federal clearance, and they have become more assertive in doing so.

      Other officials have also taken action. Oregon’s attorney general has requested a 60-day delay and has asked a judge to compel Paramount to meet a records request, while in the UK, the culture secretary has indicated she is “minded to intervene” in the acquisition.

      As of now, the timeline is still procedural. If the multistate lawsuit is filed next week, it would initiate a court battle that could delay the closing beyond October, entering a period where the ticking fee would apply. Ultimately, a federal judge would decide whether to issue an injunction to block the merger while the case is in progress, and states have previously achieved victories in similar situations even when Washington opted not to act.

      Meanwhile, Paramount has been making operational preparations, integrating the technology behind Paramount+, Pluto TV, and BET+ into a single streaming platform in anticipation of incorporating HBO Max. The ability of the states to hinder that plan will now rest with the courts.