Paramount Skydance has agreed to freeze its merger with rival Hollywood studio Warner Bros. Discovery until next June while a federal judge weighs an antitrust lawsuit from a coalition of state attorneys general who sued to block the $110 billion transaction.

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In an 11-page court filing Friday, Paramount said it would not move forward with the tie-up until June 1, 2027 — unless a federal judge issues a ruling on the suit filed by a dozen Democratic state attorneys general before then.

The agreement lengthens a temporary pause ordered this week by Judge Araceli Martínez-Olguín of the Northern District of California.

The combination of the two companies would create a modern media colossus and reshape the entertainment industry.

The merger would join together two historic film studios (Paramount Pictures and Warner Bros. Pictures), two popular streaming platforms (Paramount+ and HBO Max) and two news organizations (CBS News and CNN) under the leadership of 43-year-old mogul David Ellison.

The states challenging the deal, led by California Attorney General Rob Bonta, sued to block the merger on July 13, arguing in a 38-page complaint that it would “extinguish competition” in Hollywood.

“Today’s agreement is great news for audiences, movie theaters, and the many people who write, build, and create the art, news, and entertainment so many of us enjoy,” Bonta said in a statement.

“We are eager to continue to make our case in court and celebrate another tremendous win in our effort to ensure this unlawful merger never sees the light of day,” he added.

Bonta and his fellow Democratic attorneys general contend that the transaction violates Section 7 of the Clayton Antitrust Act of 1914, a federal law that bars mergers likely to substantially lessen competition.

The states argue the deal would reduce competition in three areas: wide-release theatrical film distribution, anticipated top-grossing movie distribution and the market for distributing basic cable channels to cable and satellite providers.

Paramount has vehemently rejected those claims, arguing that the states’ suit is “wrong on both the facts and the law” and “one of the weakest merger challenges in modern antitrust history.”

In a statement Friday afternoon, a Paramount spokesperson framed the merger pause as a “significant win because 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,” the spokesperson said, later adding: “We look forward to proving our case at trial.”

Paramount’s stock dropped more than 3% after news of the court filing broke Friday.

Paramount executives had been eager to wrap up the deal as soon as possible partly because the company had agreed to pay Warner Bros. shareholders a “ticking fee” of 25 cents a share each quarter if the transaction did not close by Sept. 30 — a penalty worth more than $600 million every three months.

Paramount spokespeople did not reply to a request for comment Friday on the ticking fee.

The company has already received regulatory clearance from the Justice Department, and it has touted similar approvals from other foreign territories, including Australia, China and the European Union.

Ellison’s pursuit of Warner Bros. has divided Hollywood, where thousands of actors, directors, writers and producers signed an open letter earlier this year arguing that corporate consolidation would lead to job cuts and higher costs for consumers.

The Writers Guild of America, the industry’s screenwriters union, filed its own antitrust lawsuit this month.

In the multi-state suit, Bonta is joined by the attorneys general of Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York and Oregon.

“From the workers and artists who bring stories to life to the families who buy tickets at the box office, Paramount’s illegal takeover of Warner Bros. is a bad deal for all those who count on a competitive entertainment industry,” New York Attorney General Letitia James said in a statement Friday.

“Halting this merger while our case proceeds is a critical victory in our efforts to uphold the law and protect the film and television industries. I look forward to continuing our case to stop this illegal merger.”