Ellison escalates threat to move PSKY out of LA if states won’t settle WBD merger suit

David Ellison

David Ellison is reportedly threatening to go through with plans to move Paramount Skydance (PSKY)’s headquarters outside of Los Angeles if the US states suing to block its takeover of Warner Bros Discovery (WBD) won’t negotiate a settlement.

Trade outlet Puck was the first to report that Ellison is making plans to begin PSKY’s exit from California on October 1, the day after the ‘ticking fee’ begins on its US$110bn WBD merger, unless talks have commenced with the coalition of 12 US states, led by California attorney general Rob Bonta.

Ellison’s threat reportedly includes a plan to move production out of California over a five-year timeline, with the PSKY CEO and chairman eyeing Tennessee, Texas and Georgia as potential new homes for the media group.

The escalation of the threat comes one week after federal judge Araceli Martínez-Olguín set March 2027 for the antitrust trial to begin, roughly four months later than PSKY had requested.

If the deal has not closed by September 30, PSKY has agreed to pay WBD shareholders an additional penalty fee of US$650m each quarter, the equivalent of around US$7m per day. That would mean PSKY would be on the hook for more than US$1bn extra by time the trial begins in March.

Ellison is motivated to avoid that scenario, and on PSKY’s earnings call last week indicated he would be open to settling ahead of a trial.

This is not the first time the idea of PSKY exiting California has been mooted, with Semafor first reporting the proposed plan four weeks ago.

Some believe Ellison has no genuine intention of relocating and is simply trying to create some leverage as he tries to convince the 12-state coalition to negotiate a settlement that will allow it to consummate its WBD deal by September 30.

Bonta on Tuesday said Ellison was posturing, describing the relocation threat as an “attempt to blackmail the regulators who are daring to enforce the law fairly and firmly” during a Politico event called The California Agenda: Sacramento Summit.

During the event, Bonta said he would be open to “structural” remedies, meaning divestitures, though did not specify what assets PSKY might need to offload in order to satisfy the coalition’s concerns. He also said the coalition would not be appeased by “behavioural” remedies, such as committing to widely releasing 30 theatrical movies annually in the US, as enforcement of such promises is tricky.

In the lawsuit, the states argue that the combination of the companies’ theatrical businesses and cable channel portfolios would “extinguish” competition. PSKY has said the legal case is “based on a misrepresentation of competition in the entertainment industry today,” claiming that blocking the deal would simply give more power to the tech giants that have come to dominate Hollywood.