Paramount settles state lawsuits, clearing path for Warner Bros. merger

Paramount Skydance has reached a settlement with California and other states that sued to block its proposed acquisition of Warner Bros. Discovery, according to a person familiar with the matter.

The settlement is expected to be announced later Monday and would clear a major obstacle to one of Hollywood’s largest mergers. Massachusetts, New York, Connecticut and Minnesota had held out, but ultimately concluded that continuing the legal fight was not justified without California, the person said.

The states secured an independent editorial board for CBS and CNN. The board will include journalists but no executives or shareholders and will be required to maintain political balance.

Paramount shares rose 7% to $10.91 in New York trading after climbing as much as 13%. Warner Bros. shares gained 10% to $30.62 after rising as much as 11%.

The settlement terms include a potential $30 million penalty for every film Paramount fails to release in theaters under a commitment to distribute 30 films a year. The company could also be required to sell its stake in Miramax if it misses the target.

If approved, the agreement would spare Paramount from late fees of $7 million a day that Warner Bros. was scheduled to begin charging Oct. 1. Paramount announced the $110 billion acquisition in February after outbidding Netflix.

Regulators in nearly 70 jurisdictions have approved the deal, but 12 state attorneys general and the Writers Guild sued, arguing that the merger could reduce competition, raise consumer prices and lower writers’ wages. A failed transaction would have required Paramount to pay Warner Bros. $7 billion.

The Ellisons plan to finance the acquisition with about $47 billion in new equity and additional borrowing. Paramount has forecast $6 billion in merger synergies, which could lead to job cuts, including 15,567 potentially overlapping corporate roles identified in an August report for Los Angeles County.