Paramount Skydance has settled lawsuits brought by 12 state attorneys general and the Writers Guild trade union, clearing a major legal obstacle to its historic $110 billion acquisition of Warner Bros. Discovery.
The settlement, reached after negotiations over the weekend and filed with a federal court on Monday, includes protections intended to limit the market power of the combined company and safeguard editorial independence. The proposed media giant would control two of Hollywood’s biggest studios, two major subscription streaming services and dozens of television channels, including CBS and HBO.
Under the agreement, Paramount has committed to releasing 30 movies a year through the combined studios, addressing concerns among cinema owners and Hollywood talent that the merger could reduce film production. Half of those films must be produced by the new company. Paramount would have to pay $30 million for every film that falls short of the target and could also be required to sell its stake in Miramax, the studio behind films including “Pulp Fiction”.
The settlement also imposes conditions on the company’s television operations. Paramount and Warner Bros. cable channels must be negotiated separately with distributors. If the company breaches that requirement, it could be forced to sell BET, VH1, Comedy Central, Smithsonian, Destination America and Science.
The agreement also seeks to address concerns over the future of Paramount’s substantial presence in California. The company has agreed to maintain its operations in Los Angeles, retain both of its major studio lots and invest $1.5 billion in domestic film and television production.
“More productions mean more work here at home and more movies for theaters to play, that bring in more business,” California Attorney General Rob Bonta said at a press conference on Monday.
The settlement triggered an immediate market reaction. Shares of Paramount and Warner Bros. rose on Monday after Bloomberg News first reported that an agreement had been reached, with Warner trading close to the $31-a-share acquisition price.
Paramount Chairman and Chief Executive Officer David Ellison thanked Bonta and the other attorneys general for negotiating the settlement, saying “our shared aim was an outcome that best serves consumers, workers and — most importantly — the creative community so vital to the art of visual storytelling.”
David Joyce, a senior analyst at Seaport Research Partners, described the settlement conditions as “very reasonable” and said they included “firmer teeth” around the requirements for film distribution.
Paramount’s earlier threat to move its operations out of California was also seen as an important factor in the negotiations. Joyce said such a move “would’ve been really catastrophic to the industry in California and all of the cottage industries around it”.
The lawsuits had sought to block the $110 billion acquisition on the grounds that the merger would give Paramount an undue share of the movie and cable television industries. The Block the Merger Coalition, representing more than 40 organisations opposed to the transaction, criticised the settlement as a “sweetheart deal” and said it would harm film and independent journalism.
Bonta had publicly opposed remedies that did not structurally alter the combined companies and had maintained a prominent role in the legal challenge. Massachusetts, New York, Connecticut and Minnesota had remained among the holdout states during settlement negotiations, but ultimately concluded that continuing the legal battle was not justifiable without California leading it, Bloomberg reported, citing a person familiar with the matter.
Those states nevertheless secured additional protections, including an independent editorial board for CBS and CNN. The board will consist only of journalists, with no executives or shareholders permitted to join, and will be required to maintain political balance, according to the person familiar with the negotiations.
The Writers Guild separately reached a settlement with Paramount that includes a contribution to a healthcare fund and protections against layoffs at CBS.
With regulators in nearly 70 jurisdictions already having approved the merger, and the Federal Communications Commission and other federal agencies having approved an extraordinary level of foreign financing, the acquisition could now close very soon.
Paramount had targeted completion in the third quarter and agreed to pay Warner Bros. late fees of $7 million a day if the transaction was not completed by the end of this month. It also faces a $7 billion breakup fee if the merger is not approved, terms agreed in February as Paramount sought to acquire Warner Bros. from an existing sale agreement with Netflix.
