A federal judge has temporarily paused Paramount's Gulf-backed $110 billion takeover of Warner Bros, saying it is “likely” to violate America's anti-trust laws aimed at preventing monopolies.
US District Judge Araceli Martinez-Olguin in California on Monday ordered the companies not to complete the deal for 14 days. Paramount and Warner Bros had hoped to close it as soon as Wednesday.
California and 11 other states sued to block the Hollywood mega-merger on July 13. The states allege the deal, which seeks to combine two of the five largest studios, would harm competition for film and cable TV distribution.
Three Gulf sovereign wealth funds are backing the takeover bid: Saudi Arabia's Public Investment Fund, Abu Dhabi's L'imad Holding and the Qatar Investment Authority.
Ms Martinez-Olguin scheduled an August 3 hearing on whether to extend the suspension. She will decide on whether to pause completion of the deal until after a trial to determine if it is illegal under federal anti-trust law.
California has requested an April 2027 trial date. Paramount has only sought to have a decision on the preliminary injunction before September 30, when its daily payments to Warner Bros start.
The judge said the states showed that “serious questions going to the merits remain” in their challenge to the merger.
“This is a critical first win in our case to ensure this mega-merger never sees the light of day,” California attorney general Rob Bonta said.
Paramount did not immediately respond to a request for comment.
The deal would give the merged company control over 27 per cent of the market for films widely released to cinemas, the suit claims. Warner Bros and Paramount would also allegedly control more than 30 per cent of anticipated blockbusters, widely released films with large production budgets.
Post-merger, only four companies would control more than 90 per cent of that market – the new entity, along with Walt Disney Co, Universal and Sony Pictures Entertainment.
Paramount has until June 4, 2027, to close the deal under its merger agreement, but must start paying Warner Bros a daily fee of $7 million beginning on September 30 until the transaction is completed.
The company has said that the tie-up deal will better enable it to compete with tech giants like Amazon and Netflix in the rapidly evolving streaming market. It has pledged to release at least 30 films in cinemas each year, a claim the states say is not realistic.
