States sue to block Paramount Warner Bros deal

• California and 11 other states filed a lawsuit seeking to block Paramount’s $110 billion acquisition of Warner Bros. Discovery.
• The states argue the transaction could reduce competition in film distribution and cable television markets.
• Paramount said the deal would create efficiencies and support increased film production if completed.

Paramount (NASDAQ:PSKY) faces a lawsuit from California and 11 other states seeking to block its proposed $110 billion acquisition of Warner Bros. Discovery (NASDAQ:WBD), with regulators alleging the deal could reduce competition in entertainment markets.

The lawsuit challenges Paramount’s plan to combine with Warner Bros. Discovery, arguing the transaction could affect film distribution, theaters and pay television distributors by increasing market concentration.

The states said the combined company would control about 27% of the U.S. film distribution market, 30% of blockbuster film distribution and 27% of the basic cable channel market if the transaction moves forward.

The legal challenge could delay the transaction for months and increase costs for Paramount, which has committed to pay about $650 million in quarterly fees to Warner Bros. Discovery shareholders if the deal does not close before October.

Paramount CEO David Ellison has said the acquisition would allow the company to compete more directly with major streaming and entertainment companies, including Netflix and Disney.

Paramount said the combined business would reduce about $6 billion in redundant infrastructure, marketing and corporate costs, while planning to release 30 films annually from its combined studio operations.