Update: (10:05am ET).
Well, that was fast: following a Friday leak that a settlement was imminent, moments ago, Bloomberg reported that Paramount Skydance has reached a settlement with California and other states suing to block its proposed acquisition of Warner Bros. Discovery, citing a person familiar with the matter.
Settlement talks came to fruition over the weekend after four states that had opposed terms of a deal outlined with California conceded. The settlement, which is expected to be announced later today, paves the way for one of the largest mergers in Hollywood history.
Lawyers for the states worked all night on the agreement, the person said. Four states — Massachusetts, New York, Connecticut and Minnesota — had been holdouts on a possible settlement, but ultimately concluded the expense of the legal battle was not justifiable without California at the helm, the person said.
The states that held out longer did succeed over the past week in securing independent editorial boards for CBS and CNN as part of the deal, the person said.
The terms, summarized below, are said to include a financial penalty if the company fails to make good on a promise to distribute 30 films per year in theaters.
If the final terms are approved, the agreement would spare Paramount from having to pay late fees to Warner Bros. of $7 million a day, which were to begin on Oct. 1.
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Earlier
Shares of Warner Bros. (WBD) are up 7% and Paramount Skydance (PSKY) gains 6% after the WSJ reported Friday that Paramount was in advanced settlement talks with the California AG Rob Bonta aimed at settling the California-led antitrust lawsuit that would block the company's proposed merger with Warner Bros. Discovery.
According to the report the two sides met over the weekend and discussed several potential concessions including
- $1.5bn investment by Paramount for production in California
- Maintain both studio lots & stay in California
- Potential sale of cable channels and creation of a board to maintain CNN’s editorial independence
- Financial penalties for producing less than 30 films per year.
Bonta, a consortium of 12 states, and the Writers Guild of America, sued to block Paramount's $110 billion acquisition of Warner Bros. in July. Since then, the two sides have been locked in discussions to resolve the matter. The suing states fear further consolidation in the entertainment industry would reduce jobs and competition. Meanwhile, Paramount, led by CEO David Ellison, argues the combination will create a company large enough to successfully compete with the tech giants that have encroached on the entertainment industry.
The merger would bring the two eponymous Hollywood studios and under one roof, alongside the Paramount Plus and HBO Max streaming services and a slew of cable channels such as CNN, MTV, and TBS, among others.
One of the proposals in the negotiations includes establishing an oversight board to ensure CNN retains editorial independence. Other possibilities include the sale of certain cable channels, according to IBD
Another proposal would impose, according to Bloomberg, a $30 million fine on Paramount for each film that falls short of its previously pledged goal of releasing 30 movies per year in theaters. Ellison and Paramount originally made the pledge to get theater operators to support the merger. However, Bonta had been wary of Paramount's promise because he considered it difficult to enforce. The fine would seem to address that.
Under the terms of the discussions, Paramount would also be forced to sell its stake in the studio Miramax, according to The Wall Street Journal.