Paramount ⁠Skydance and Warner Bros Discovery have agreed to delay closing their $81 billion merger for more than a year. The surprising decision came on Friday as a judge continued hearing a challenge from 12 states seeking to block the deal. But the delay could cost Paramount about $7 million per day from October under a ‘ticking fee’ to compensate shareholders.

The two media giants — both created through major corporate mergers in the past five years — have been embroiled in a major legal battle over the record-setting deal. And the announcement comes mere days after an US District judge froze the transaction for weeks. Twelve US states have sought to block the agreement, and the case is now headed down the path toward a larger antitrust trial.

“The result is exactly what we have sought from the outset: a direct path to a trial based on the evidence. This is the fastest and clearest way to prove that this transaction is good for competition, good for consumers, and good for creators, a conclusion dozens of competition authorities around the world have already reached,” reports quoted the company as saying in a regulatory filing. 

Ticking fees and more

Paramount and Warner previously said that they hoped to close their deal sometime in the third quarter of this year. The delay could also cost the company about $7 million a ‌day in fees ‌it agreed to pay Warner Bros ‌shareholders if the merger does not close by September 30. A Reuters review of similar challenges indicates that it has taken judges an ​average of eight ​months to rule on such cases.

Paramount had pledged to give shareholders some compensation if the acquisition doesn’t close by Sept. 30 — in the form of a 25-cent per share “ticking fee” for every quarter past that date. It has also agreed to a regulatory termination fee of $7 billion.

Record $81 billion merger

Paramount Skydance had reached a deal to acquire Warner Bros Discovery in late February after months of negotiations. A rival bid by Netflix fell short after the David Ellison-led company offered to buy the entire company for $31 per share. The companies contend that a merger will be good for industry growth and give consumers access to more content — particularly if the HBO Max and Paramount+ libraries are combined. But critics have decried what further consolidation could mean in an industry already controlled by just a few major players.

It had begun as a hostile takeover campaign from Paramount — with Warner repeatedly backing a deal it struck with Netflix in December last year. The streaming giant had backed out at the end of February, saying the new price it would have to pay made the deal “no longer financially attractive”.

What comes under the merger?

A Paramount-Warner combo would combine two of Hollywood’s five legacy studios that remain today, in addition to their theatrical channels. Beyond “Harry Potter,” Warner movies like “Superman,” “Barbie,” and “One Battle After Another” — as well as hit TV series like “The White Lotus” and “Succession” — would join Paramount’s content library. Paramount’s lineup of titles include “Top Gun,” “Titanic” and “The Godfather.” And beyond CBS, it owns networks like MTV and Nickelodeon, as well as the Paramount+ streaming service. A merger between the two companies would put CNN under the same roof as CBS, which has already seen significant editorial shifts under new Skydance ownership.