Paramount to settle lawsuits, paving way for Warner Bros. takeover

Paramount Skydance Corp. has reached a settlement with California and other states suing to block its proposed acquisition of Warner Bros. Discovery Inc. , according to 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, said the person, who asked not to be named discussing confidential negotiations. 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.

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The states that held out longer did succeed over the past week in securing an independent editorial board for CBS and CNN as part of the deal, the person said. Strengthening the board’s independence was part of the reason the holdout states ultimately agreed to the deal, the person said. The board will be composed only of journalists, with no executives or shareholders allowed to join, the person said, adding that the board will be required to have political balance.

Paramount shares climbed seven per cent to US$10.91 in New York trading after rising as much as 13 per cent. Warner Bros. shares were up 10 per cent to US$30.62 after rising as much as 11 per cent.

The terms are said to include a financial penalty if the company fails to make good on a promise to distribute 30 films per year in theatres .

Discussions included Paramount having to pay US$30 million for each film that falls short of that goal, Bloomberg reported. It could also be forced to sell its stake in Miramax, the studio behind movies such as Pulp Fiction, if it fails to meet the target.

Representatives for Paramount, California, New York, Minnesota and Massachusetts didn’t immediately respond to requests for comment.

If the final terms are approved, the agreement would spare Paramount from having to pay late fees to Warner Bros. of US$7 million a day, which were to begin on Oct. 1.

Paramount, the parent company of CBS, MTV and other media businesses, announced in February that it was buying Warner Bros. after outbidding rival Netflix Inc. The US$110 billion deal will combine two of Hollywood’s most storied movie studios, two major subscription streaming services and two of the largest owners of cable-TV channels.

Although regulators in nearly 70 jurisdictions blessed the acquisition, 12 state attorneys general and the Writers Guild trade union sued to the block the merger, saying it would stifle competition for film and cable-TV distribution, raise prices for consumers and in the writers’ case, lower their wages. A trial date was set for March.