Paramount SkyDance (PSKY.US) Nears Settlement Agreement to Advance $110 Billion Warner Acquisition, But Some State Attorneys General Still Withhold Support

According to The Motley Fool, it has been reported that Paramount Global (PSKY.US) is engaged in in-depth negotiations with state attorneys general, aiming to finalize its $110 billion acquisition of Warner Bros. Discovery (WBD.US). However, not all state attorneys general are in support of this plan. Sources indicate that in recent days, California Attorney General Rob Bonta, who has been leading a coalition of 12 states and has filed a lawsuit challenging this deal, has been working to reach a settlement with Paramount. New York Attorney General Letitia James has consistently opposed the current deal terms, seeking additional protections for employees. The report also states that Connecticut and at least two other states have concerns about the settlement agreement and do not currently support the proposal. These states are seeking further concessions from Paramount. Another source familiar with the negotiations revealed that Connecticut Attorney General William Tong is “actively working to maintain the independence of CNN and CBS News.”

Warner Bros. Discovery shares surged by as much as 8.3% in after-hours trading last Friday, following reports that settlement talks between Paramount and Rob Bonta had reached an advanced stage. Another previous report indicated that the settlement discussions included terms such as establishing independent oversight of CNN and committing to a specified number of theatrical film releases.

Paramount now faces the ultimate test that will determine the fate of its media empire. This $111 billion deal, which aims to merge Paramount with Warner Bros. Discovery to create a new Hollywood giant, has already received antitrust approvals in 68 countries and jurisdictions worldwide, but faces antitrust lawsuits in the U.S. by 12 Democrat-led states and the Writers Guild of America (WGA).

This battle over the largest merger in Hollywood history began in July of this year. On July 13, under the leadership of California Attorney General Rob Bonta, eleven other states joined in filing a lawsuit, alleging that the $111 billion Paramount acquisition of Warner Bros. Discovery would significantly harm market competition.

The states, in their complaint, pointed out that the combined entity would obtain an illegal market share in film production and cable television. Specifically, after the merger of Paramount channels (such as MTV and Nickelodeon) with Warner Bros. channels, the new company would account for 27% of all fees paid by pay-TV distributors to channel owners, and would capture 34% of basic cable network audience share.

On July 20, California federal district judge Araceli Martínez-Olguín issued a temporary restraining order, ordering the transaction to be paused for at least two weeks. Subsequently, Paramount agreed to suspend the deal until June 2027 at the latest, pending a court decision. The antitrust hearing has been scheduled for March 2, 2027.

The delay caused by litigation is placing enormous financial pressure on Paramount. Under the terms of the deal, if the merger is not completed by September 30, 2026, Paramount would be required to pay Warner Bros. Discovery shareholders a daily “ticking fee” of $7 million as compensation for the delay.

Paramount has requested that the twelve states who filed suit post a $1.88 billion bond to cover the costs of the delay resulting from the litigation. The company stated that by the time the trial concludes and closing arguments are submitted in March of next year, it will have paid Warner Bros. Discovery shareholders $1.3 billion in unrecoverable “ticking fees.”

Rob Bonta has stated that he wants significant modifications to the deal before agreeing to any settlement. Paramount has indicated it is open to some form of structural remedy.

Confronted with mounting litigation pressure, Paramount is focusing on a major divestment plan. It is estimated that if Paramount agrees to sell Turner Networks, a Warner Bros. Discovery asset, as part of a settlement, the company could potentially raise about $8 billion in funds and obtain certain legal relief.

Turner Networks is one of Warner Bros. Discovery’s most valuable asset groups, mainly including TBS, TNT, and CNN. These channels generate about $2 billion in EBITDA (earnings before interest, taxes, depreciation, and amortization) annually, and are expected to fetch a price roughly four times their earnings. Previous reports have mentioned that Paramount is also considering selling Warner Bros. assets such as HGTV and Food Network to help resolve the litigation.

The sale of Turner Networks is a double-edged sword for Paramount. According to LightShed Partners analyst Rich Greenfield, Paramount’s original intention in acquiring Warner Bros. Discovery was largely to integrate the two companies’ vast television asset base to improve operational efficiency. However, under antitrust pressure, sacrificing certain assets to preserve the overall deal may be a price Paramount will have to pay.