California Folds: Paramount-Warner $111B Merger Clears Path

Paramount settled with 12 states led by California, clearing the final hurdle to its $111B Warner Bros. Discovery takeover.

Paramount Skydance reached a settlement on Monday with 12 states, led by California Attorney General Rob Bonta, that had sued to block its roughly $111 billion acquisition of Warner Bros. Discovery, according to the Los Angeles Times. The Writers Guild of America also settled its separate lawsuit the same day, per PBS and ABC11 News. California AG Rob Bonta was careful to frame the deal as a concession, not an endorsement: "This settlement is not a vote of support for this merger," he said, while Paramount CEO David Ellison called it "complete clearance for this merger." The agreement covers five years and is court-enforceable, Bonta's office said.

For months Bonta had told anyone who would listen that the merger would ruin Hollywood and that he could stop it, The Hollywood Reporter notes. Then, at the moment his leverage appeared highest, he folded. The Hollywood Reporter reports that Gov. Gavin Newsom inserted himself into negotiations, saying he took Ellison's threat to move out of California "seriously," and that Paramount thanked Newsom "for his support throughout this process." The pressure from Newsom, Los Angeles Mayor Karen Bass and gubernatorial nominee Xavier Becerra left the state's top prosecutor in an untenable position as an Oct. 1 deadline loomed when a $7 million-per-day ticking fee would start accruing.

The settlement imposes a five-year operating agreement rather than the divestitures typical of enforcer-friendly deals, The Hollywood Reporter reports. Missing the quota triggers a $30 million per-film penalty and possible divestiture of Paramount's 49% Miramax stake. According to BBC, at least 20% of production must occur in the US for the first two years, rising above 30% after.

The deal also addresses concerns about combining CNN with CBS News under Ellison, a Trump ally. Paramount must create a five-member "News Editorial Independence Board" of acting or retired journalists with at least a decade of experience within 180 days of closing, BBC reports. Per The Week, the board is meant to insulate CBS News and CNN from corporate intervention in newsroom decisions, though a CBS News staffer told The Guardian the Paramount-led oversight structure "sounds like utter garbage." Separately, PBS and BBC report Paramount agreed to prohibit writer layoffs at CBS News for five years and pay $17.5 million into the WGA's health fund, plus legal fees.

The merger will combine two of Hollywood's oldest studios, CBS and CNN, HBO Max and Paramount+, and libraries from "Harry Potter" to "Top Gun," per PBS. The Los Angeles Times reports Paramount has promised Wall Street more than $6 billion in cost cuts, and a recent Los Angeles County economic report predicted an estimated 4,500 LA-area workers could lose their jobs. Critics were blunt: former FTC commissioner Alvaro Bedoya said "today, billionaires have yet again bribed, censored, and bullied their way to the top," according to PBS. The LA Times also notes Paramount's takeover is heavily leveraged, with nearly $80 billion in debt and $24 billion in equity commitments from Gulf royal families.

A federal judge must still approve the settlement, but The Week reports Paramount expects to close the deal in about two weeks, with Semafor saying the merger is expected to close in October. The Hollywood Reporter notes the Supreme Court had recently signaled potential review of the states' case, and that holdout states — New York, Connecticut, Minnesota and Nevada — were ultimately overruled once California agreed. Connecticut AG William Tong said his state wanted full divestiture of CNN and CBS News and expressed disappointment, per The Hollywood Reporter. Meanwhile, Bonta clarified that while Ellison says the combined company will stay in Los Angeles, that commitment was not written into the legal agreement, BBC reports.