Paramount Skydance (PSKY.US) Reportedly Nears Settlement Agreement to Advance $110 Billion Warner Acquisition, but Some State Attorneys General Still Not Supportive

Paramount Skydance (PSKY.US) is reportedly in advanced negotiations with state attorneys general to push through its $110 billion acquisition of Warner Bros. Discovery (WBD.US), but not all state attorneys general support the plan. People familiar with the matter said that over the past few days, California Attorney General Rob Bonta, who has been leading a coalition of 12 states and filed a lawsuit challenging the deal, has been working to reach a settlement agreement with Paramount. New York Attorney General Letitia James has been opposed to the current settlement terms and wants additional protections for employees. The report also said that Connecticut and at least two other states also have concerns about the settlement agreement and currently do not support the plan. These dissenting states want Paramount to make more concessions. The report, citing another person familiar with the negotiations, said Connecticut Attorney General William Tong is "working to preserve the independence of CNN and CBS News." Warner Bros. Discovery shares jumped as much as 8.3% in after-hours trading on Friday evening after reports that settlement negotiations between Paramount and Rob Bonta had entered an advanced stage. According to another report, the terms involved in the settlement negotiations include independent oversight of CNN and a commitment to the number of theatrical film releases. Paramount is facing an ultimate test that will determine the fate of its media empire. The deal, valued at up to $111 billion and aimed at merging Paramount and Warner Bros. Discovery into a new Hollywood giant, has already received antitrust approval from 68 countries and jurisdictions worldwide, yet has encountered an antitrust litigation challenge in the United States brought by 12 Democratic-led states and the Writers Guild of America (WGA). The regulatory battle over the largest merger in Hollywood history began in July of this year. On July 13, led by California Attorney General Rob Bonta and joined by 11 other states, a lawsuit was formally filed, alleging that Paramount's $111 billion acquisition of Warner Bros. Discovery would severely harm market competition. The states stated in their complaint that the merged entity would gain an illegal market share in film production and cable television. Specifically, after Paramount's channels (such as MTV and Nickelodeon) merge with Warner Bros.' channels, the new company would account for 27% of all fees paid by pay-TV distributors to channel owners, and hold a 34% viewership share on basic cable networks. On July 20, California federal district judge Araceli Martnez-Olgun issued a temporary restraining order requiring the deal to be paused for at least two weeks. Subsequently, Paramount agreed to pause the deal until no later than June 2027, pending a court ruling. The antitrust trial has been scheduled to begin on March 2, 2027. The delay caused by the litigation is putting enormous financial pressure on Paramount. According to the deal terms, if the merger is not completed by September 30, 2026, Paramount Skydance must pay Warner Bros. Discovery shareholders $7 million per day in "ticking fees." Paramount has asked the court to require the 12 states that filed the lawsuit to provide $1.88 billion in bond to compensate for the transaction delay costs caused by the litigation. The company noted that by the time the trial ends next March and final legal arguments are submitted, it will have paid $1.3 billion in non-recoverable "ticking fees" to Warner Bros. Discovery shareholders. Rob Bonta has said that before agreeing to a settlement, he wants major changes to the deal. Paramount has said it is open to some form of structural remedy. Facing increasing litigation pressure, Paramount is looking toward a major asset divestiture plan. It is estimated that if Paramount agrees to sell Warner Bros. Discovery's Turner Networks as part of a litigation settlement, the company could receive about $8 billion in funds and certain legal relief. Turner Networks is one of the most valuable asset portfolios under Warner Bros. Discovery, mainly including channels such as TBS, TNT and CNN. These channels generate approximately $2 billion in EBITDA (earnings before interest, taxes, depreciation and amortization) each year, and the business is expected to sell for about four times those profits. There have previously been reports that Paramount is considering selling Warner Bros. assets such as HGTV and the Food Network to resolve the litigation. Selling Turner Networks is a double-edged sword for Paramount. LightShed Partners analyst Rich Greenfield pointed out that Paramount's original intention in acquiring Warner Bros. Discovery largely lay in integrating the two companies' massive television asset portfolios to improve operating efficiency. However, under the pressure of antitrust litigation, sacrificing some assets to preserve the overall deal may be a price Paramount has to pay.