California Attorney General Rob Bonta is expected to require Paramount to sell select cable channels and ensure its film studio remains distinct from Warner Bros. Discovery before approving the proposed merger, according to a Wall Street Journal report published Sunday that cites sources familiar with the matter.
Representatives from Paramount and California state officials are scheduled to meet on Monday to explore potential avenues to settle the state’s pending antitrust lawsuit against the transaction.
Legal counsel from both sides met Friday to set an agenda for Monday’s session, which will include negotiations over the companies’ cable and motion-picture operations.
open image in galleryParamount and Warner Bros. Discovery declined to comment on the developments, while the California Attorney General’s office did not respond to requests for comment outside of standard business hours.
The lawsuit, filed on July 13 in Oakland federal court, saw California and 11 other states sue to block Paramount’s $110 billion acquisition of Warner Bros. Discovery.
The state coalition alleged that creating such a media behemoth would diminish competition in movie distribution and cable television, harming both theaters and pay-TV distributors. State officials also argued that the consolidation would raise consumer prices and reduce wages for industry workers.
open image in galleryThe Writers Guild of America has also filed a suit to challenge the merger.
Paramount has countered that the acquisition will enable it to expand output rather than restrict it. Paramount Chief Executive Officer David Ellison promised that the combined film studios would release 30 movies annually, though state regulators have dismissed this pledge as legally unenforceable.
The legal battle threatens to disrupt Ellison’s broader strategy to transform Paramount into a direct competitor against streaming giants Netflix and Disney.
open image in galleryOn Monday, Paramount Skydance asked a U.S. judge to compel the dozen states suing over the acquisition to post a $1.88 billion bond to cover expenses tied to transaction delays. Paramount faces a contractual daily penalty of $7 million if it does not finalize the $110 billion deal by September 30.
Paramount pointed out that the trial over the states’ challenge is scheduled to begin in March, with final legal briefs due in April. By that point, the company will have already paid Warner Bros. shareholders $1.3 billion in non-recoverable “ticking fees.”
That cumulative figure will rise to $1.7 billion in “ticking fees” through June 1, plus $190 million in incremental financing costs if the merger is delayed until June 2027. Paramount had voluntarily included these fee provisions during its pursuit of Warner Bros.
open image in galleryAdditionally, Paramount emphasized that its clearance from the U.S. Department of Justice is set to expire on February 19. The company asserted that requiring a bond would allow it to recoup financial damages if the court ultimately approves the merger, noting that the states have “ample resources to post” even a substantial bond amount.
In late July, Paramount agreed to suspend the acquisition pending a judicial ruling on the state-level challenge. A review of recent antitrust actions found that similar merger suits require an average of eight months for a judge to issue a final decision.
Paramount noted that regulatory authorities representing at least 68 countries have already cleared or declined to contest the transaction, leaving the state lawsuits as the sole remaining barrier to completion.
In response to the bond request, California Attorney General Rob Bonta pushed back forcefully, stating that Paramount and Warner Bros “are two sophisticated companies who willfully decided to include a costly ticking fee as a provision in their merger contract.”
Bonta stressed that Paramount had previously agreed to the exact timeline it is now seeking to challenge. “Now, they’re trying to get a do-over,” Bonta said. “Paramount went into this process with eyes wide open. They are lying in a bed of their own making, and once again, trying to blackmail us to get us to back down.”