Key Takeaways
- Paramount seeks a $1.88 billion bond from states challenging its Warner Bros. acquisition.
- The merger could cost Paramount $1.7 billion in ticking fees through June.
- California and 11 states argue the $110 billion deal could raise media prices.
Paramount Skydance is asking a U.S. judge to require California and 11 other states to post a $1.88 billion bond to cover costs if their lawsuit delays its $110 billion acquisition of Warner Bros. Discovery.
Paramount Skydance seeks protection from delay costs
Paramount says the merger delay could create substantial costs because the agreement requires it to pay Warner Bros. shareholders $7 million each day if the deal does not close by Sept. 30.
The company says it could pay about $1.3 billion in unrecoverable “ticking fees” by April, when the states’ legal challenge is expected to conclude after a March trial and the filing of final briefs.
Paramount Skydance also estimates that the delay could generate $1.7 billion in ticking fees through June 1, along with $190 million in additional financing costs if the transaction is pushed to June 2027.
The company argues that the states have enough resources to post the requested bond and says the bond would allow Paramount to recover losses if a court ultimately approves the merger.
Paramount Skydance also faces a Feb. 19 expiration date for approval from the U.S. Justice Department, adding another deadline to the transaction.
States challenge $110 billion media deal
California and 11 other states sued July 13 in federal court in Oakland to block the acquisition. They argue the combination would create a media company with greater power to raise prices for movies and television programming.
The Writers Guild of America has also filed a lawsuit challenging the transaction.
California Attorney General Rob Bonta rejected Paramount’s request for protection against the costs created by the delay. He said the companies knowingly accepted the ticking-fee provision when they negotiated the merger agreement.
“Paramount went into this process with eyes wide open,” Bonta said, arguing the company is now seeking to reverse a decision it previously accepted.
Bonta also accused Paramount of using the financial costs of the agreement to pressure states to abandon their opposition to the deal.
Paramount and Warner Bros. Discovery agreed in late July to pause the acquisition until after a ruling on the states’ challenge.
Lawsuit threatens Ellison’s expansion plan
The legal fight threatens Paramount CEO David Ellison’s plan to transform the company into a larger competitor to Netflix and Disney.
Paramount says regulatory authorities in at least 68 countries have either approved the merger or decided not to challenge it. The company maintains that the lawsuits are now the only remaining obstacle to completing the transaction.
The timing of the legal challenge could prove significant. A Reuters review of recent merger cases found that similar challenges have taken an average of eight months for judges to issue rulings.
The states’ lawsuit is scheduled for trial in March, with final legal briefs expected in April. That timeline could leave Paramount responsible for hundreds of millions of dollars in additional payments before the court decides whether the merger can proceed.
The requested $1.88 billion bond would therefore shift some of the financial risk of the litigation from Paramount to the states if the merger is ultimately allowed to close.
