The figure that matters: $111 billion. That is the price of Paramount Skydance’s takeover of Warner Bros. Discovery, and the last legal obstacle to it fell away on Wednesday when a federal judge in Oakland signed off on a settlement with the states that had sued to stop it.
U.S. District Judge Araceli Martínez-Olguín added no conditions of her own. “The Court finds the proposed settlement agreement reflects a procedurally sound resolution,” she wrote. The ruling ends the antitrust case brought by California Attorney General Rob Bonta and 11 other state attorneys general, who argued the combination would violate federal antitrust law and choke competition. The lawsuit had stalled the deal for two months. Paramount CEO David Ellison wants to close early the following week.
What the settlement requires
The agreement runs five years. By the numbers, the combined company must:
release at least 30 films in theaters every year; commit another $1.5 billion to domestic film production; and set aside $47.5 million for workers hurt by the merger. It also creates a five-member panel to watch editorial independence at CBS News and CNN, though critics point out that the Ellisons control appointments to the board. Paramount faces limits on how it uses its leverage when negotiating carriage of its basic cable channels, and an independent monitor is expected to oversee compliance.
At a Thursday hearing, the judge pressed on the five-year term and on the value of the Miramax studio, which Paramount agreed to sell if it misses its film targets. She also asked why the states dropped so many of their original demands. Bonta’s office said the settlement “resolves our antitrust concerns in every market we brought in our case.”
The opposition
Hollywood never warmed to the deal, and critics called the settlement weak. They accused Bonta of caving to pressure from Gov. Gavin Newsom and Los Angeles Mayor Karen Bass, who publicly urged him to drop the fight amid fears that Paramount would carry out its threat to leave California. The Block the Merger coalition said the outcome “will cost jobs, mute creativity, weaken independent journalism, and damage our First Amendment rights.” Sen. Cory Booker had asked the judge to order an independent review of the terms. The judge said she recognized the deep disappointment of opponents.
The jobs math is stark. Los Angeles County’s Department of Economic Opportunity estimates the merger will cost 4,500 local jobs, and Paramount has told investors it will cut $6 billion in spending within three years.
Financing and leadership
Investors will note how the buyout is being funded. Paramount is selling about $44 billion of bonds and $7.5 billion of loans, according to Bloomberg, which said the combined company will carry more than $87 billion of investment-grade and high-yield debt. Interest rates have climbed since Ellison’s team first hoped to price the offering. Warner Bros. Discovery shareholders are to be paid $31 a share.
Larry Ellison has promised to guarantee the $47.5 billion in equity his son needs, and three Middle Eastern sovereign wealth funds, representing the royal families of Saudi Arabia, Abu Dhabi and Qatar, have agreed to invest $24 billion in the merged company.
Paramount also announced that Mattel CEO Ynon Kreiz will join as co-chief executive and run day-to-day operations. His last day at Mattel is Friday.
