Paramount, Warner Bros. Shares Rally After Merger Lawsuits Settled

Paramount Skydance and Warner Bros. Discovery shares moved sharply Monday after Paramount reached settlements with California and 11 other states that had sued to block the companies' proposed merger, clearing a major legal obstacle to the transaction.

Paramount Skydance and Warner Bros. Discovery reached settlements resolving legal challenges to their proposed merger. [Photo: Epicgenius, Wikimedia Commons]

The settlement resolved antitrust litigation brought by a coalition of 12 state attorneys general.

The states had alleged that the merger could reduce competition and harm consumers, workers and the entertainment industry. The settlement remains subject to court approval.

Reuters reported that the settlement included independent editorial boards for CNN and CBS and a $30 million penalty for each film the merged company fails to release under its agreed theatrical-output commitment.

Under the agreement announced by California Attorney General Rob Bonta's office, Paramount committed to release at least 30 films a year, including 20 wide releases, during the first two years after the merger.

The commitment rises to 32 films a year, including 21 wide releases, during the following three years.

Paramount must also release at least four independent films annually.

If the company fails to meet the film-output requirement, it would be required to divest Miramax and pay $30 million per missed film toward specified industry and antitrust-related funds, according to the settlement terms.

The settlement also includes a commitment to spend at least an additional $1.5 billion on U.S. film production over five years and establish a $47.5 million fund for workers affected by the merger.

Paramount's proposed acquisition of Warner Bros. Discovery has been valued at about $110 billion to $111 billion, depending on the valuation measure used. The settlement removes a major legal obstacle, but the transaction still requires final court approval.