A Paramount studio lot in Hollywood, Calif. The company struck a deal to acquire Warner Bros. for US$110-billion earlier this year.Mike Blake/Reuters
California, New York and other U.S. states are preparing a lawsuit to block Paramount Skydance’s US$110-billion acquisition of Warner Bros., sources familiar with the matter told Reuters on Friday. The lawsuit is expected to be filed in the coming weeks, the sources said.
It was not immediately clear which other states would join the lawsuit, which would mark the boldest move yet by the states in their effort to be at the forefront of U.S. antitrust enforcement.
California Attorney-General Rob Bonta on Thursday criticized what he called President Donald Trump’s “abdication” of federal antitrust agencies with more resources than the state governments. Bonta, a Democrat, has led the charge among states concerned about the deal, promising a probe soon after Paramount announced it would acquire Warner Bros., after beating a bid by streaming giant Netflix.
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On Friday, a spokesperson for Bonta’s office said California’s investigation remains active but declined to comment further.
Shares of Warner Bros. fell after Reuters first reported the news, and were down 3.6 per cent on Friday afternoon. Paramount shares added to losses and were down 6.7 per cent.
Not all lawsuits seeking to block mergers succeed. But they can delay the consummation of deals by months if a judge issues an order pausing the merger while the case plays out.
California Attorney-General Rob Bonta in Oakland, Calif., on Thursday. He oversees the largest antitrust division in the U.S.Nathan Frandino/Reuters
Paramount has agreed to pay shareholders a fee starting in October if the deal has not closed. Those fees add up to around US$6.9-million per day, the company said recently. Analysts have said Paramount’s political connections and other factors should give it an easier road to regulatory clearance from federal antitrust watchdogs in the U.S. Paramount CEO David Ellison’s father, billionaire Oracle co-founder Larry Ellison, has cultivated ties with Trump.
The U.S. Department of Justice is likely to reach a decision on the deal soon, according to a source familiar with the matter. The DOJ sent subpoenas in late March seeking information on how the merger would affect studio output, content rights, streaming competition and movie theaters.
A Paramount spokesperson said the deal would bring greater competition, and opposing it “means giving entrenched incumbents like Netflix an advantage they do not deserve.”
“We will continue to fight against any attempt to derail a deal that plainly benefits consumers, creators, and the industry as a whole,” the spokesperson said.
Paramount has pledged to maintain both studios, and produce a minimum of 30 theatrical films annually after the deal closes.
The deal, which would combine two of Hollywood’s four major studios, has drawn criticism from actors, writers and others in Hollywood who fear job losses. Theater owners also oppose the combination of the storied Warner Bros. movie studio, maker of the Harry Potter and Superman films, with Paramount Pictures, arguing it will give cinemas fewer movies to choose from, eroding competition.