Just as Larry Ellison and Paramount executives had worried, the state antitrust challenge to their $111 billion merger with Warner Brothers has resulted in significant delays that could prove terminal.
Two weeks ago California and eleven other states filed an antitrust lawsuit to block the merger, pointing out that the consolidation would undermine market competition, resulting in mass layoffs, higher consumer prices, and product quality hits as the merged company attempts to pay down a massive debt load. This isn’t hard to predict or prove given that every single merger that Warner Brothers has been involved with in the last quarter century has been a disastrous dud.
The judge overseeing the case granted a 14-day restraining order pausing the deal. But Paramount has now agreed to suspend the merger for far longer in the apparent belief that this could speed up the looming trial:
Paramount framed the agreement as a “significant win” that would help it close the deal. The company said the move would speed up the legal process by pushing the case to a trial sooner. It will also help avoid prolonged back-and-forth over some legal issues, like the merits of a court-ordered delay.
So as it stands, the Paramount merger will simply expire if they can’t win or dismantle the antitrust trial by June 4, 2027. That’s a problem for all sorts of reasons, the biggest being that the terms of the agreement involve Paramount being forced to pay a ticking fee of about $7 million per day (or $650 million per quarter) to investors starting in October until the deal closes (or doesn’t).
As mentioned previously, Larry Ellison and Oracle are also hugely over-leveraged on the AI bubble and data center investment; if that bubble pops during this window (which is broadly expected since nobody but Nvidia is making any money), that could heavily complicate his financial backing for the already very debt-heavy deal. At the same time, broadcast television isn’t magically getting more popular anytime soon.
And even if this deal does ultimately succeed, there’s been very little evidence that Paramount, much like the Trump administration that rubber-stamped the superunion, has any idea what they’re doing.