(Bloomberg) — Paramount Skydance Corp. has settled lawsuits brought by 12 state attorneys general and the Writers Guild trade union, a move that will allow the company to close its historic $110 billion acquisition of Warner Bros. Discovery Inc.
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The parties worked through the weekend to reach the deal, which includes protections designed to limit the market power and ensure the editorial independence of the media giant, which will control two of Hollywood’s biggest studios, two major subscription streaming services and dozens of TV channels ranging from CBS to HBO.
Paramount has promised to release 30 movies a year at the combined studios, a move designed to placate cinema owners and Hollywood talent who believed the merger would reduce film output.
In a bid to appease politicians and unions who feared Paramount might move its significant presence from California, the company has agreed to keep its operations in Los Angeles, not sell either of its big studio lots and invest $1.5 billion in domestic film and TV production.
“More productions mean more work here at home and more movie for theaters to play, that bring in more business,” California Attorney General Rob Bonta said at a press conference Monday.
Shares of Paramount and Warner Bros. both jumped on Monday after Bloomberg News first reported that a settlement had been reached, with Warner now trading very close to the $31-a-share acquisition price.
“The settlement conditions are very reasonable,” David Joyce, a senior analyst Seaport Research Partners, said in an interview. The agreement includes “firmer teeth” for the conditions around the film distribution guarantees.
Paramount’s threat to move out of California was likely a powerful incentive to get a deal done.
“That would’ve been really catastrophic to the industry in California and all of the cottage industries around it, so I think that this is definitely the best case for everybody involved,” Joyce said.
Attorneys general from 12 states, all Democrats, and the Writers Guild trade union have sued to block Paramount’s $110 billion acquisition of Warner Bros., arguing that it would give the company an undue share of the movie and cable TV industries.
The litigation was led by Bonta, who took a strident posture in public interviews for weeks, saying that he was opposed to remedies that wouldn’t structurally change the combined companies. Bonta was increasingly isolated after possible opponents to the merger, including big movie chains and some his state’s highest-profile politicians seemed to support the deal and urge him to settle.
Four states — Massachusetts, New York, Connecticut and Minnesota — had been holdouts on a possible settlement, but ultimately concluded the expense of the legal battle was not justifiable without California at the helm, the person said.
The states that held out longer did succeed over the past week in securing an independent editorial board for CBS and CNN as part of the deal, the person said. Strengthening the board’s independence was part of the reason the holdout states ultimately agreed to the deal, the person said. The board will be composed only of journalists, with no executives or shareholders allowed to join, the person said, adding that the board will be required to have political balance.
Regulators in nearly 70 jurisdictions have already approved the merger, and the Federal Communications Commission and other federal agencies blessed an extraordinary level of foreign financing, making it likely the acquisition can close very soon.
Paramount had targeted a closing date in the third quarter, and had promised late fees of $7 million a day to be paid to Warner Bros. if the merger wasn’t consummated by the end of this month. Paramount had also agreed to pay a $7 billion breakup fee if the merger wasn’t approved, terms the company offered in February in order to win Warner Bros. from an existing sale agreement with Netflix Inc.
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