The European Union gave conditional approval to Paramount Skydance’s $110 billion takeover of Warner Bros. Discovery on Wednesday, removing one regulatory hurdle just as a U.S. state lawsuit threatens to derail the timeline entirely. The Commission signed off after Paramount agreed to unwind a European distribution pact with Universal Pictures within 13 months of closing, a fix Brussels says eliminates the risk of the combined studio’s films being distributed jointly with Universal or Disney. That should have been the last major antitrust box to tick, the U.S. had already cleared the deal, but California and 11 other states sued on July 13 arguing the merger of two of the five largest studios would hurt competition for film and cable distribution.
A federal judge paused the transaction for 14 days on Monday, pushing a potential close past this week and toward a September 30 deadline. Miss that date and Paramount owes Warner shareholders roughly $7 million a day in late fees. Warner shares have slid since the ruling, widening the spread to Paramount’s $31-per-share offer to near its widest since the February announcement. The market is pricing in a real chance the deal dies or gets repriced, and the spread is doing the talking.
The U.K. adds another layer; the culture secretary has flagged media plurality concerns, raising the specter of a public-interest intervention. So the EU green light is a win that currently buys David Ellison nothing, the clock is ticking, the arbitrage spread is yelling, and the lawyers are just getting started. The next court hearing in early August will decide whether the deal stays on ice pending a full trial. If the states win an injunction, the September deadline becomes a formality and the $7 million-a-day meter starts running.
Paramount beat Netflix for this asset in February. Seven months later the strategic rationale hasn’t changed but the execution risk has multiplied. Regulators in Brussels are satisfied; regulators in Sacramento and London are not. The deal is now a race between a court calendar and a contract clause, and the only certainty is that the lawyers will get paid either way.