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California investigates Paramount's Warner Bros takeover,

citing

economic concerns

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Paramount's cost synergies imply job cuts, affecting

California's economy

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California has history of challenging large mergers, often

working with federal enforcers

By Jody Godoy

Feb 27 (Reuters) -

California has a lot to lose if Paramount Skydance ( PSKY )

buys Warner Bros Discovery ( WBD ) and could stand in the way of

a deal, while Paramount's deep political connections to the

Trump administration are expected to smooth the path to federal

regulatory approval.

State Attorney General Rob Bonta said on Thursday that

California is already investigating the deal and will be

"vigorous" in its review. Hours earlier, Paramount beat out

streaming giant Netflix ( NFLX ) in a months-long battle for

control of the storied Hollywood studio.

Paramount's bid is likely to raise concerns about job cuts in

California that also dogged Netflix's ( NFLX ) bid. Paramount sees $6

billion in cost "synergies" in the deal, which is often code for

massive layoffs and cutting, or sharply paring back, entire

units. It can also mean reducing the number of suppliers and

squeezing existing contractors for better terms after the two

companies merge. None of that is good news for the California

economy.

While Paramount initially came in with what the Warner Bros

board viewed as an inferior offer, it was highly successful in

stirring up political opposition to Netflix's ( NFLX ) bid among

Republicans in Washington. Now, Bonta and California Governor

Gavin Newsom, both Democrats, are likely to be the biggest

hurdles to Paramount after the media conglomerate won the fight

by upping its offer price.

State intervention to block the deal is "very likely," TD

Cowen analysts said in a note on Thursday, adding that "approval

from federal regulators seems likely given the political

environment."

Spokespeople for Warner Bros and Paramount did not

immediately respond to requests for comment.

Newsom, a potential 2028 presidential candidate, has gone

out of his way to present himself as a leader among the

political opposition to Trump. Bonta has sued the federal

government repeatedly over Trump administration decisions on

issues such as clean energy, pipeline projects and health

funding.

U.S. Senator Adam Schiff, a California Democrat, said on

Thursday that "what was true for Netflix ( NFLX ) is still true now for

Paramount," calling for the deal to face "the highest levels of

scrutiny."

California has challenged large mergers in the past. In

2019, it led a group of states challenging T-Mobile's

acquisition of Sprint. While the states lost in court,

California secured a settlement recouping its costs and getting

temporary commitments to keep jobs in place and offer low-cost

plans for consumers.

California also joined the Federal Trade Commission and several

other states in a successful bid to block Kroger's ( KR )

takeover of rival grocery chain Albertsons.

While California often works with federal enforcers, Bonta's

office has also levied criticisms against some settlements that

cleared the way for mergers.

California, for example, is part of a coalition of 13 states

opposing a Justice Department settlement allowing Hewlett

Packard Enterprise's ( HPE ) $14 billion acquisition of Juniper

Networks.

Over the past few years, Bonta's office has staffed up on

competition enforcers under the leadership of antitrust head

Paula Blizzard. A longtime state antitrust enforcer, Blizzard

previously worked at the DOJ and at the Federal Communications

Commission, which enforces federal regulations on broadcasters.