States settle lawsuit over Paramount-Warner merger, clearing key hurdle for $81 billion deal

Wyatte Grantham-Philips, Associated Press Wyatte Grantham-Philips, Associated Press

CHICAGO (AP) — Twelve states and Hollywood writers challenging Paramount's buyout of Warner Bros. Discovery agreed to settle their lawsuits on Monday, effectively paving the way for the $81 billion mega merger to cross the finish line, with some new commitments from the company. The blockbuster deal will still bring together two of Hollywood's oldest studios , key TV networks like CBS and CNN and streaming platforms HBO Max and Paramount+, as well as decades-old libraries with titles ranging from "Harry Potter" to "Top Gun."

But among terms of Monday's agreement announced by California Attorney General Rob Bonta — who led the states' case — Paramount pledged to increase film production in the U.S., commit millions of dollars to a fund aimed at supporting workers who are displaced by the merger and establish monitoring of editorial independence of the company's news operations.

The settlement still needs a final sign-off by a judge. Bonta said Monday's agreement was about "protecting people's careers, the lives they've built here in California, the livelihoods their families rely on" — but he maintained it was not a vote in support of the merger.

"I don't think these two companies should merge," Bonta said in a Monday press conference. "But that's not something that we are focused on with our resolution here."

Paramount CEO David Ellison welcomed the settlement, which he said marked "complete clearance for this merger." He added that "bringing Paramount and Warner Bros. Discovery together will build that stronger Hollywood, creating expanded opportunity for our people and even more great entertainment for audiences around the world."

READ MORE: What a combined Paramount-Warner would mean for streaming, movies and news

The coalition of states — including entertainment heavyweights like California and New York — sued to block the merger in July, alleging a Paramount-Warner combo would "extinguish competition" and lead to fewer choices for consumers, particularly movie theatergoers and cable customers across the U.S.

The Writers Guild of America also filed suit, and both challenges were headed toward a full antitrust trial set to kick off in March. The WGA separately confirmed Monday that it settled its case, too.

"We continue to believe the merger will cause damage to writers and the industry at large," the guild said in a statement. "Now that the Attorneys General have settled with Paramount, however, as a nonprofit, the WGA must contend with the reality of forging ahead alone, with no backing from government enforcers, with a complex antitrust lawsuit that would cost millions of dollars to pursue through trial."

The union added that Paramount had agreed to prohibit writer layoffs at CBS News for five years and to pay $17.5 million to WGA's health fund, along with attorneys' fees from the litigation.

Paramount previously agreed to delay its transaction well into next year so the challenges could make their way through court.