A temporary restraining order has halted the merger between Paramount and Warner Bros. just one day prior to its completion.

      A California judge has issued a 14-day temporary restraining order on the $110 billion merger between Paramount and Warner Bros. Discovery following a lawsuit from 12 state attorneys general. Paramount had intended to finalize the deal by July 22. Starting in October, a $650 million quarterly ticking fee will be incurred.

      California District Judge Araceli Martínez-Olguín approved the temporary restraining order on Monday, halting the merger for two weeks. This order was issued after a coalition of 12 state AGs, led by California's Rob Bonta, filed a lawsuit to block the merger, claiming it would breach the Clayton Antitrust Act. The judge noted that the states provided "compelling evidence" indicating that the merged company would hold significant market share in the wide-release theatrical distribution sector.

      Paramount was poised to close the merger as early as July 22, believing all regulatory approvals were secured. Although the US Department of Justice had cleared the merger in June, the state lawsuit has introduced additional challenges. The merger would bring together Paramount and Warner Bros. film studios, as well as the CBS broadcast network, various pay-TV networks like CNN, TNT, MTV, and BET, along with streaming services Paramount+ and HBO Max. The states contend that the combined company would control nearly one-third of US film production and basic cable programming.

      Time is of the essence, as a ticking fee will apply if the deal is not finalized by September 30: an extra 25 cents per share per quarter payable to WBD shareholders, amounting to around $650 million in cash quarterly. Paramount also agreed to a $7 billion breakup fee if the merger collapses over regulatory issues. The states might request another temporary restraining order following the 14-day period or seek a preliminary injunction, which would further postpone the merger. Last week, TNW reported that Paramount indicated it would take the case to the Supreme Court if the states succeeded in blocking the deal.

      Paramount referred to the restraining order as “one of the weakest merger challenges in modern antitrust history,” asserting that the merger would stabilize basic cable television, enhance theatrical releases, and create job opportunities in film production. Bonta deemed the merger unlawful. Additionally, Netflix's acquisition of an AI filmmaking startup for $587 million and its use of AI across 300 productions highlights the competitive pressures that could justify consolidation, according to Paramount and WBD. Whether the judge will agree will hinge on whether the 14-day delay extends to 14 months.