California Attorney General Rob Bonta and Paramount Skydance CEO David Ellison have reached an agreement to halt the state’s antitrust challenge. This agreement allows Ellison to move forward with the $111-billion acquisition of Warner Bros. Discovery. An inside source revealed that both parties settled antitrust claims initiated by Bonta and 11 other state attorneys general in July.
As part of the settlement, Paramount committed to distributing 30 films in theaters each year and investing $1.5 billion in Hollywood film production over the next five years. Should Paramount fail to meet these obligations, the company will incur penalties. Paramount and Bonta’s representatives have not commented on the agreement.
A federal judge must approve the deal. This will allow Paramount to finalize the purchase of Warner Bros. Discovery. This merger will bring together two historic film studios, combining rights to major franchises like Batman, Harry Potter, and Top Gun, along with merging HBO Max and Paramount+ streaming services. Additionally, Paramount will own numerous cable TV channels, such as CNN, TBS, and HGTV.
“The road to resolution was challenging,” noted the source familiar with the proceedings.
Negotiations were tense, with Bonta canceling a session in August after potential terms were leaked. The settlement faced skepticism from allies like New York Attorney General Letitia James, who felt the terms did not sufficiently address the power Paramount might have if the merger proceeded.
Ellison aimed to wrap up the Warner acquisition by late September, ahead of Congressional elections and a key deadline. California Gov. Gavin Newsom and LA Mayor Karen Bass pressured Bonta towards a resolution, fearing Paramount might relocate.
Ellison’s urgency stemmed from financial obligations. Beginning October 1, Paramount will pay Warner investors a “ticking fee” of 25 cents per share per quarter until the deal completes. This adds up to $7 million daily. The merger is heavily financed through $80 billion in debt and $47 billion in equity, with contributions from foreign investors and Ellison’s father, billionaire Larry Ellison.
The Federal Communications Commission recently approved Paramount’s request for foreign investors to own nearly half of the company, though the Ellison family retains voting control. Paramount assured investors of more than $6 billion in cost cuts, although the merger could result in approximately 4,500 job losses in Los Angeles County.
Despite receiving regulatory clearances globally, including from the European Commission and the U.S. Justice Department, Paramount faced ongoing hurdles with Bonta, amidst threats of moving the studio to another state. Paramount also garnered support from significant unions and cinema chains, countering Bonta’s lawsuit regarding theatrical distribution harms.
The case faced a critical juncture as Paramount sought a $1.88-billion bond from states and the Writers Guild of America, a move meant to test the coalition’s resolve. Paramount’s aggressive lobbying included a controversy involving actor Mark Ruffalo, who was accused of antisemitic rhetoric against the merger. This led Jewish groups to defend Ruffalo’s free speech rights.
Bonta postponed a settlement talk, accusing Paramount of leaking details and remarked that the state was prepared to litigate if necessary. The states filed a substantial lawsuit claiming the merger would breach U.S. antitrust laws and overconcentrate market share in several categories. Paramount aimed to complete the merger by the upcoming June deadline to avoid extra fees owed to Warner Bros. Discovery and recover costs paid following Netflix’s withdrawal from the bidding process.