Paramount Skydance has reached a settlement with California and 11 other states that sued to block its $110 billion acquisition of Warner Bros. Discovery.
The deal clears one of the last significant obstacles to closing what would become one of the largest mergers in Hollywood history.
Settlement talks concluded over the weekend after four states that had initially opposed California’s negotiated terms ultimately conceded to the agreement.
The settlement includes the creation of independent editorial boards for both CNN and CBS as part of the merger’s conditions.
Paramount also agreed to a $30 million penalty per film for any shortfall against its pledge to release 30 movies annually following the merger’s close.
Other concessions include a $1.5 billion investment in California production and a commitment not to sell either studio lot.
The state attorneys general, led by California’s Rob Bonta, had originally filed suit alleging the merger would give the combined entity too much control over basic cable TV and the theatrical film business.
Paramount had previously threatened to leave California if an agreement was not reached by October 1, when a so-called ticking fee begins accruing, a threat Bonta publicly called “blackmail.”
The company faces a $7 million-a-day ticking fee owed to Warner Bros. Discovery shareholders for each day after September 30 that the deal remains unclosed.
The combined company would control a significant portfolio of media properties, including CNN, HBO, “Harry Potter,” “The Daily Show,” and rights to NFL football games.
The Writers Guild of America has also filed a separate lawsuit arguing the merger would suppress wages and worsen working conditions for film and television writers.
A Morningstar analyst noted that trade unions would be “hard pressed to hold up this deal without paying the bond that Paramount requested,” referring to the $1.88 billion bond Paramount requested to address the costs of delay.
The same analyst added that “on the merits, the unions would have a very low probability of winning their case,” suggesting the remaining legal challenge is unlikely to derail the transaction.
