EU Clears 110bn Paramount and Warner Bros Merger but Deal Remains on Hold in US

European regulators have granted approval for the proposed 110 billion dollar merger between Paramount Skydance and Warner Bros Discovery, although the transaction faces significant legal challenges in the United States that currently prevent its completion.

The European Commission authorised the deal following Paramount’s commitment to terminate a substantial film distribution partnership with Universal Pictures across Europe. Under the terms of the clearance, Paramount must dissolve the arrangement within 13 months and is prohibited from entering into comparable ventures for a decade. Competition authorities had expressed concern that maintaining shared distribution arrangements with a competitor would afford the merged entity excessive influence over theatrical releases throughout the European market.

Whilst European regulatory approval represents a critical milestone, the transaction remains suspended in the United States. Despite the Department of Justice indicating its support for the merger in June, a coalition comprising 12 US states filed suit last week seeking to block the deal. The states contend that the combination would inflict substantial harm on cinema operators, basic cable distributors and audiences across the nation.

US District Judge Araceli Martínez-Olguín subsequently issued a temporary restraining order to halt the takeover whilst the legal arguments are evaluated. Alon Kapen, a corporate transactional lawyer at Farrell Fritz, noted that whilst the temporary restraining order merely constitutes a brief pause and does not determine the ultimate outcome, it suggests the court regards the states’ concerns about the theatrical market as meriting serious consideration.

The delay carries substantial financial implications for the parties involved. Should the transaction fail to complete by 30 September, Paramount faces an obligation to pay Warner Bros shareholders a so-called ticking fee of approximately seven million dollars daily until closure.

The Writers Guild of America has emerged as an additional opponent to the merger, warning that the deal poses threats to employment and wage levels within the industry. WGA head Tom Fontana stated following the states’ legal action that the combined entity would possess tremendous power to suppress wages and eliminate opportunities for emerging writers.

UK regulators are conducting their own assessment of potential intervention, focusing on implications for local news provision, children’s programming and competition within the streaming sector.

Paramount has defended the transaction on the grounds it would benefit consumers, committing to release a minimum of 30 films theatrically each year, representing double its current output.