Paramount's acquisition of Warner Bros. Discovery (WBD) has been put on hold after the California Attorney General and other state prosecutors filed an antitrust lawsuit. Bloomberg reporter Lucas Shaw, in an interview with foreign media, believes that this merger, which was initially widely favored by the market, may now be delayed for months, or even longer, due to court proceedings.
The space for reconciliation is narrowing.
The article states that the market had previously generally believed the state government was more likely trying to gain concessions through litigation than actually preventing the deal from going through. However, this view has clearly shifted over the past month. As the litigation progresses, the strength of the opposition has begun to be reassessed.
Shaw believes the Ellison family may still push for a deal, but an early settlement is becoming increasingly difficult. This is because buyers are now more inclined to offer "behavioral remedies," such as operational commitments or restrictions, while state prosecutors prefer "structural remedies," namely the sale of some assets.
State prosecutors place greater emphasis on asset stripping.
If negotiations proceed to this stage, Paramount and WBD may need to divest some of their businesses in order for the deal to move forward. The article states that, theoretically, both companies are not without assets to sell, but have not yet shown a clear willingness to divest.
Regarding whether the outcome of the November US election will change the situation, the article believes the impact will exist, but be relatively limited. This is because the federal government has already approved the deal, and the main battleground will be in the courts rather than Congress.
Netflix is more likely to adopt a wait-and-see approach in the short term.
However, if the Democrats regain partial control of Congress, Paramount may still face greater political scrutiny. The report mentions that there is already attention on whether David Ellison and Paramount's current management's adjustments to CBS News bring it closer to the Trump administration's position. If the deal goes through, the change in ownership of CNN could also trigger more hearings and public pressure.
With the deal's prospects weakening, the market is also watching to see if Netflix will reconsider its acquisition of WBD. Shaw's assessment is that Netflix is more likely to remain on the sidelines rather than immediately return to negotiations. Even if the deal ultimately falls through, the hurdle to overcome for Netflix to make another move remains high.
