Resolution Reached in California’s Antitrust Case Against Paramount

California Attorney General Rob Bonta and David Ellison, CEO of Paramount Skydance, have reached an agreement to conclude the state’s antitrust battle. This move allows Ellison to advance with his $111 billion acquisition of Warner Bros. Discovery, according to a source familiar with the situation.

The settlement addresses antitrust claims made by Bonta and 11 other state attorneys general. As part of the agreement, Paramount has committed to releasing 30 films annually in theaters and investing $1.5 billion in Hollywood film production over the next five years. If these commitments are not met, Paramount will face penalties.

Both Paramount and Bonta spokespeople refrained from commenting on the settlement, which requires approval from a federal judge. Once approved, Paramount can finalize its acquisition of Warner Bros. Discovery. This merger will reshape Hollywood by uniting two historically significant film studios.

Paramount would gain ownership of numerous cable channels, including CNN, TBS, HGTV, Food Network, and Comedy Central, in addition to CBS. The route to this resolution was challenging. Bonta discontinued a negotiation session in late August when potential deal terms were prematurely revealed. Later, during settlement discussions, objections came from some of Bonta’s influential allies, such as New York Attorney General Letitia James and Connecticut Attorney General William Tong. They believed the deal terms were inadequate to limit Paramount’s potential dominance in the film and television sectors.

Ellison aimed to complete the acquisition by September’s close, ahead of midterm Congressional elections and a crucial deadline impacting shareholder payouts. Support for a settlement came from California Governor Gavin Newsom and others who pushed for a resolution instead of pursuing a trial. Newsom highlighted the seriousness of Paramount’s threat to relocate out of state.

Ellison faced financial incentives to expedite the deal. Beginning October 1, a ticking fee of 25 cents per quarter, per share would come into effect for Warner investors, potentially costing $7 million daily. Paramount’s acquisition is highly leveraged, with $80 billion in debt financing the merger. Larry Ellison, David’s father, has pledged $47 billion in equity support, while royal families from Saudi Arabia, Qatar, and Abu Dhabi are investing an additional $24 billion.

Recently, the FCC approved Paramount’s request for foreign investors to own nearly 50% of the merged company, although the Ellison family will retain voting control. To fulfill promises of cost-cutting, Paramount plans to save over $6 billion, potentially affecting 4,500 Los Angeles-area jobs.

Paramount secured regulatory clearances globally, including from the European Commission, Canada, and the U.S. Justice Department. Despite these approvals, the company faced challenges from Bonta and political opposition. Ellison even threatened to move operations from Melrose Avenue to other states. Paramount also gained support from Hollywood unions and cinema chains to drop opposition to the deal.

Bonta’s lawsuit focused on competition and theatrical distribution issues. Paramount hoped a federal judge would require states and the Writers Guild of America to post a $1.88 billion bond, compensating delay-related deal costs if the merger proceeded.

The debate intensified when Paramount confronted activist-actor Mark Ruffalo, accusing him of using “antisemitic tropes” against the merger. Jewish groups and artists defended Ruffalo’s speech rights. Bonta canceled a settlement conference, accusing Paramount of information leaks.

The lawsuit, filed in Northern California, claimed the merger violated the U.S. Clayton Act. The states argued the merger would give Paramount-Warner excessive market share in films and cable networks.