Paramount to Settle Lawsuits, Paving Way for Warner Bros. Merger

Paramount Skydance Corp. has reached a settlement with California and other states that were suing to block its proposed acquisition of Warner Bros. Discovery Inc., according to a person familiar with the matter. The resolution, expected to be announced later today, clears a major legal hurdle for the $110 billion deal, which was announced in February after Paramount outbid Netflix Inc.

Negotiations concluded over the weekend after four states that had opposed the terms outlined with California conceded. The person, who asked not to be named to discuss confidential negotiations, said Massachusetts, New York, Connecticut and Minnesota had been holdouts but ultimately determined that the expense of continuing the legal battle was not warranted without California leading the charge. Lawyers for the states worked through the night to finalize the agreement.

The settlement includes specific behavioral requirements for Paramount. If the company fails to distribute 30 films per year in theaters, it faces a financial penalty of $30 million for each film that falls short of that goal, according to Bloomberg. Additionally, Paramount could be forced to sell its stake in Miramax, the studio behind films such as Pulp Fiction, if it misses the target. The holdout states succeeded in securing independent editorial boards for CBS and CNN as part of the deal terms.

If final terms are approved, the agreement spares Paramount from paying late fees to Warner Bros. of $7 million a day, which were scheduled to begin on Oct. 1. The merger would unite two major Hollywood film studios along with their respective subscription streaming services and extensive cable television channel portfolios.

While regulators in nearly 70 jurisdictions have approved the acquisition, 12 state attorneys general and the Writers Guild trade union sued to block the merger. They argued it would stifle competition for film and cable-TV distribution, raise consumer prices and lower writers' wages. A trial date was previously set for March. California Attorney General Rob Bonta, who led the litigation, had previously stated a preference for structural changes, such as asset sales, over behavioral remedies that are difficult to enforce.

Representatives for Paramount, California, New York, Minnesota and Massachusetts did not immediately respond to requests for comment.