The European Commission approved Paramount's $111 billion acquisition of Warner Bros. Discovery on Wednesday, handing David Ellison a crucial regulatory win even as a federal judge in California paused the deal for two weeks and a multistate antitrust lawsuit threatens to push a trial into next year.
The clearance came with conditions including Paramount's exit from its international distribution partnership with Universal Pictures through the United International Pictures joint venture. The Commission said the remedy eliminates the risk of higher rental terms for cinema operators in European Economic Area countries where the venture operates. Paramount must unwind its UIP stake within 13 months of closing and abide by a ten-year behavioral commitment.
The EU greenlight keeps the company's stated third-quarter closing target alive on paper. But the clock is expensive. Paramount agreed to pay Warner shareholders a ticking fee of 25 cents a share, or roughly $650 million a quarter, for each day beyond September 30 that the deal has not closed.
On Monday a federal judge granted a temporary restraining order sought by California Attorney General Rob Bonta and eleven other states. Their complaint argues the merger would shrink the roster of major film studios to four from five in markets for wide-release films, blockbuster films and cable network licensing. The attorneys general will ask the court to convert the TRO into a preliminary injunction at an August 3 hearing, a move that would freeze the transaction until a full trial.
The Writers Guild of America filed its own preliminary injunction motion Wednesday in the same Northern District of California court, adding another layer of litigation risk.
Paramount insists the European Commission's analysis undercuts the states' case. The EU found that Disney, Universal, Sony, Amazon MGM, A24, Lionsgate and European studios provide sufficient competition at the film production level, and that streaming platforms constrain linear pay-TV channels for children. The AG complaint, by contrast, defines the relevant market narrowly around the five largest majors and does not count streaming as a direct substitute.
The August 3 hearing is the next flashpoint. If the judge grants a preliminary injunction, the September 30 deadline will almost certainly be missed and the ticking fee meter starts running in earnest. The EU approval is real progress, but in this deal the US courts hold the stopwatch.