Shares of Paramount Skydance and Warner Bros. Discovery jumped sharply on Monday amid reports that Paramount is in advanced settlement talks with California officials to resolve legal challenges to its proposed acquisition of Warner Bros. Discovery.
Paramount Skydance shares rose as much as 7%, while Warner Bros. Discovery shares gained nearly 10%. At 10:23 am GMT, Paramount was trading 6.76% higher at $10.90, while Warner Bros. shares were up 9.68% at $30.50.
The gains came after reports that Paramount is nearing a potential settlement with California Attorney General Rob Bonta and other states that have challenged the proposed merger on antitrust grounds. Reuters later reported that Paramount had reached a settlement with California and other US states, citing Bloomberg News, although details of the agreement were not immediately disclosed.
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The proposed acquisition, valued at around $110 billion-$111 billion including debt, has faced legal opposition from a coalition of 12 state attorneys general and the Writers Guild of America. The plaintiffs have argued that the combination would reduce competition across the film and cable television industries. California led the coalition in filing the lawsuit in July.
One of the reported conditions under discussion is a commitment by Paramount to release at least 30 films in theatres each year following the merger.
According to people familiar with the negotiations cited by Bloomberg, Paramount could face a financial penalty of $30 million for every film it falls short of the annual target. The company could also potentially be required to sell its 49% stake in Miramax if it fails to meet the commitment.
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Paramount has previously offered the 30-film theatrical distribution pledge to major cinema chains as part of efforts to secure support for the proposed transaction. The company could potentially meet the target by distributing films produced by other studios, according to reports.
Other concessions have also reportedly been discussed. These include a significant investment in film production in California, with one estimate putting the potential investment at around $1.5 billion, as well as commitments to retain studio operations in the state. Potential sales of certain cable networks and other measures have also been reported.
The legal challenge was launched after California and 11 other state attorneys general sued to block the proposed acquisition. California's attorney general has argued that the merger would combine two major Hollywood film distributors and two major owners of basic cable channels, raising concerns about market concentration.
The coalition previously secured an agreement that prevents Paramount and Warner Bros. from completing the merger until June 1, 2027, or until a court rules on the states' claims, whichever comes first.
The settlement discussions represent an effort to address the antitrust concerns while allowing the proposed transaction to move forward. However, the terms reported in recent days have not all been publicly confirmed, and negotiations had previously faced disagreements over proposed remedies.
Deal Background
Paramount's proposed takeover followed a bidding battle with Netflix for Warner Bros. Discovery. Warner shareholders subsequently approved Paramount's revised offer, putting the transaction's reported value at around $111 billion including debt.
The acquisition would bring Warner Bros.' film and television assets under the same ownership as Paramount's entertainment businesses, significantly expanding the portfolio controlled by Paramount Chief Executive David Ellison.
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