When Paramount announced its $110 billion acquisition of Warner Bros. Discovery in February, it appeared like finally the end of a very long road. WBD, an amalgamation of different sports and entertainment brands flung together over the years, had first agreed to a Netflix buyout before Paramount’s competing offer became impossible to ignore.
The Paramount-WBD marriage in sports would mean combining CBS Sports and TNT Sports, enhanced digital reach, and a balance sheet that can compete in the era of sky-high rights fees, from the NFL to the UFC.
So what’s the holdup? Federal and European regulators have given their thumbs up. But a group of 12 states’ attorneys general filed an antitrust lawsuit two weeks ago to stop the pending merger, and won a temporary restraining order (TRO), at least for the moment, stopping the deal. Then, Paramount agreed to hold off on the merger until June 1, 2027, or earlier if it wins the AGs case.
What exactly is going on and what does it mean? Below, I run through some basic M&A infrastructure as well as legal timelines.
Did Paramount actually propose to hold a trial next month?
The lawyer leading Paramount’s efforts, Jeff Kessler, is a familiar name in sports, having repped college players, sports unions, and professionals over decades of an impressive career. Immediately after the TRO ruling, Kessler proposed a three-day preliminary injunction mini-trial in August. PI hearings are not common, in part because the loser essentially has little chance to win the case. That’s because the judge’s ruling generally shows which side he or she favors. Two years ago, Fubo sued Fox, Disney, and WBD and had a week-long PI trial to block the triumvirate’s plans for a streaming sports app. The trio lost, the joint venture collapsed, and months later Disney simply acquired Fubo.
Yes, the losing side can appeal, but by the time the decision comes down, both parties will likely have moved on for financial reasons. That gives the district court judge enhanced power in these cases.
“If Paramount had a PI hearing, maybe in a posture that wasn’t entirely favorable, and they lost, it wouldn’t be a final decision because there’s still going to be a trial someday,” one antitrust attorney who declined to be identified in order to speak candidly about the case said. “But you’re now solidifying in the judge’s mind what the right answer is, right?”
Kessler reversed course, dropped the PI hearing, and instead moved for a full-court trial in November. The lawyer called the move “crazy aggressive,” adding, “certainly, I think people recognize that merger cases like this should move quickly.”
So even by the standards of merger antitrust trials, November is incredibly rushed. A typical antitrust case may stretch out over years as the arduous task of discovery can consume many months and longer. It’s true, in the case of a government effort to stop a merger, the pace does quicken. The AGs have suggested a June 2027 trial, which would be just after a proposed closing of the merger. The parties are due to submit their trial schedule proposals to the court on Friday.
What are the penalties for not closing the deal?
Starting October 1, if the deal is not closed, Paramount pays WBD shareholders 25 cents per day per share, which comes to $650 million a quarter. And if the deal doesn’t close, Paramount owes WBD another $7 billion. “That’s very high,” the lawyer said. Breakup fees are typical in a merger, but having the breakup fee combined with an earlier running tab makes this one stand out.
Is this case unique?
Federal and state agencies do sue to stop or alter mergers. A few aspects of this process are somewhat unusual. The long period between February, when the merger was announced, and mid-July 2026, when the state AGs sued, is problematic because of the financial pressure bearing down on the two companies looking to merge. This is magnified by the fees that start to accumulate on October 1. Kessler initially asked for an early August PI hearing, which would have been just weeks after the AGs’ lawsuit, but ahead of the October 1 deadline. As it stands, his November trial hope is unlikely in such a complicated merger.
What are the arguments?
The AGs, like other critics of the deal, worry about the consolidation of power, from movie studios to digital media and content. The worry is fewer choices for those employed by these companies, and higher prices for consumers. The other side points out in an era where YouTube has more views than any other entity, with Netflix not far behind, the definition of the market Paramount-WBD violates is questionable. Putting Paramount and WBD together just enables the two to compete with the digital giants like Amazon and Alphabet (Google). One of the first steps in an antitrust case is to define the market the defendant supposedly violates. The government will want a narrow market definition, while Paramount-WBD will push for a far wider market, thus making it difficult to say the merger had too much power in the marketplace.
An ironic duo
Finally, one observation about a very unlikely pairing. Recently, Paramount added Beth Wilkinson to its legal team. Like Kessler, she is a known quantity in sports. She advised the NFL during the concussion settlement days; she is repping the league in the Sunday Ticket case, and also investigated the Washington Commanders over sexual harassment allegations.
By contrast, Kessler is a renowned labor attorney known for his combative relationships with some of the leagues. But now he is arguing for management, with one of his football adversaries on his team.
About Daniel Kaplan
Daniel Kaplan has been covering the business of sports for more than two decades. A proud founding reporter of SportsBusiness Journal, he spent the last four years at The Athletic.