The California\u2019s attorney general\u2019s office announced a settlement Monday resolving a 12-state legal challenge to Paramount Skydance\u2019s $110 billion merger with Warner Bros. Discovery, clearing a key hurdle for the transaction. <\/p>\n
The merger would join together two historic film studios (Paramount and Warner Bros.), 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.<\/p>\n
The states opposing the deal, led by California Attorney General Rob Bonta, sued to block the merger July 13, arguing in a 38-page complaint that it would \u201cextinguish competition\u201d in Hollywood.<\/p>\n
Paramount agreed to freeze the merger until either the antitrust challenge was resolved or June 1, 2027 \u2014 whichever came first. Judge Araceli Mart\u00ednez-Olgu\u00edn of the U.S. District Court for the Northern District of California, who is presiding over the case, had scheduled an antitrust trial for early March.<\/p>\n
The terms of the settlement include a pledge by the company to release 30 films per year for the first two years of the deal, followed by 32 films in each of the following three years \u2014 or pay a fee for missing that target. <\/p>\n
The fee of $30 million per missed film will be paid into health care and retirement trust funds associated with Hollywood unions, such as the Writers Guild of America, International Alliance of Theatrical Stage Employees and Directors Guild of America.<\/p>\n
Paramount is also pledging to establish independent editorial boards overseeing the operations of CNN and CBS News. <\/p>\n
Bonta also said that the combined company would invest more than $1 billion in production and film releases in the United States.<\/p>\n
In a statement Monday, Ellison said, \u201cWe are grateful to Attorney General Bonta and his fellow AGs, as well as the WGA, for engaging in good faith to find a path forward to a resolution that serves all parties, and to Governor Newsom for his support throughout this process.\u201d<\/p>\n
\u201cOur goal has always been to build a stronger Hollywood \u2014 one with more stories told, greater choice for consumers and stronger competition,\u201d he added. <\/p>\n
Shares of both Paramount and Warner soared more than 10% as reports of the settlement circulated early in the day.<\/p>\n
Additionally, as part of the settlement agreement, \u201cthe merged company must conduct negotiations for Paramount basic cable channels independently from negotiations for Warner basic cable channels, preserving the existing competitive dynamic between the companies,\u201d New Jersey\u2019s attorney general said in a statement.<\/p>\n
\u201cThe merged company will commit $47.5 million in a workforce fund over five years for training and career development for workers who are displaced by the merger,\u201d the statement said.<\/p>\n
The lawsuit challenging the deal was filed by Bonta and his fellow Democratic attorneys general from Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington. <\/p>\n
They argued that the transaction violated Section 7 of the Clayton Antitrust Act of 1914, a federal law that bars mergers likely to reduce competition. The states said the deal would lessen 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.<\/p>\n
Paramount rejected those claims, arguing that the states\u2019 suit is \u201cwrong on both the facts and the law\u201d and \u201cone of the weakest merger challenges in modern antitrust history.\u201d<\/p>\n
Paramount executives had been eager to wrap up the deal as soon as possible partly because the company agreed to pay Warner shareholders a \u201cticking fee\u201d of 25 cents a share each quarter if the transaction did not close by Sept. 30 \u2014 a penalty worth more than $600 million every three months.<\/p>\n
In August, Paramount\u2019s lawyers asked Mart\u00ednez-Olgu\u00edn to require the merger\u2019s legal opponents, which also includes the Writers Guild, to put up a nearly $1.9 billion bond. The money, the company said, would cover the costs of delays caused by the antitrust lawsuit.<\/p>\n
The Justice Department threw its support behind Paramount\u2019s demand<\/a> that the opponents should be forced to post a bond as the price of continuing to block the merger. Mart\u00ednez-Olgu\u00edn had scheduled a hearing on Paramount\u2019s bond request for Sept. 24<\/a>.<\/p>\n Paramount had already received regulatory clearance from the Justice Department, which approved the deal June 12,<\/a> and it has touted similar approvals from other foreign territories, including Australia, Canada and China.<\/p>\n