By Matthew Vadum
Contributing Writer
Paramount Skydance on Monday settled with California and 11 other states that tried to block its $110 billion acquisition of Warner Bros. Discovery, clearing a path for what is expected to be one of the largest media mergers ever.
The deal allows the companies to move toward closing the transaction instead of fighting the states’ antitrust lawsuit. A federal judge in San Francisco still must enter a proposed consent decree and lift an order that has barred the companies from merging.
California Attorney General Rob Bonta said at a press conference that the agreement to settle will bring more film production to the United States — at least $300 million more each year — as well as a deal to increase annual film releases after closing.
Warner Bros. Discovery shareholders overwhelmingly approved the transaction in April, despite some pushback over CEO David Zaslav’s potential payout of $886 million, which they turned down in an advisory vote.
The company also received an open letter signed by actors, writers and directors opposing the deal.
Federal regulators and antitrust regulators in the United Kingdom and the European Union approved the merger.
The lawsuit was filed in July.
Democratic attorneys general joined the California-led legal action from Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington state.
The states alleged that the transaction would harm competition in certain markets.
The states alleged that the deal violated the Clayton Antitrust Act, a 100-year-old federal law that forbids mergers that tend to create a monopoly or substantially lessen competition. The combined company would control nearly a third of theatrical motion pictures and a third of cable television network programming, including 50 of the most popular cable channels, Bonta said in July.
This merger would give the company more than 30% of anticipated blockbuster movies, and four distributors would control more than 90% of that submarket of possible top-grossing films, Bonta also previously said.
U.S. District Judge Araceli Martinez-Olguin granted a temporary restraining order on July 20, blocking the closing of the transaction. After that order expired, on consent of the parties, the court ordered that the companies could not close the merger until the court ruled on the lawsuit, or until June 1, 2027, whichever came sooner. If the court ruled, they would have to wait five days before closing.
Under the contract, Paramount agreed to pay Warner Bros. shareholders about $7 million a day extra if the merger did not close by Sept. 30. It then asked the judge to make the 12 states and the Writers Guild of America — which had filed a related suit to stop the deal — put up a bond of up to $1.88 billion to cover that cost. A hearing on that request had been scheduled for Sept. 24.
The proposed consent decree, filed with the U.S. District Court for the Northern District of California, does not require Paramount to sell CNN or a studio. It establishes court-enforceable rules on film output, U.S. production spending, basic cable television network negotiations and newsroom oversight.
The companies are aiming to close the transaction, which awaits court approval, by early next month.
Jill McLaughlin and Reuters contributed to this report.
