PSKY reaches settlement with state coalition, paving way for WBD deal to close

The Paramount lot in LA

Gary Bembridge via CC

Paramount Skydance (PSKY) is set to close its US$110bn acquisition of Warner Bros Discovery (WBD) after it reached a settlement with the 12-state coalition looking to block the deal on antitrust grounds, and has also settled with the Writers Guild of America (WGA).

The lawsuit was the final regulatory clearance needed to complete the mega-merger, which will bring together PSKY assets like CBS, Paramount+ and Paramount’s film and TV studios with WBD’s HBO, HBO Max, CNN and a suite of factual cablenets.

The settlement comes after the state coalition, led by California attorney general Rob Bonta, was reported to be in advanced negotiations with PSKY last week. The two sides then continued negotiating over the weekend before finally closing the settlement agreement today.

Under the terms of the settlement with the 12-state coalition, PSKY has agreed to meet specific thresholds for the number of films it releases and the amount of production it does in the US over the next five years.

PSKY must release at least 30 films annually in the US over the next two years, with 20 of them being wide releases. In the three years after that, it must release 32 films annually, with at least 21 wide releases. If it does not hit its targets, it will have six months to make up the shortfall. If it fails to do so, it will be forced to divest its 49% ownership stake in Miramax.

In addition, PSKY has agreed to spend at least US$1.5bn on production in the US every year for the next five years. That represents a step up from the roughly US$1.2bn PSKY spent on US production in 2025. The settlement means PSKY will remain in California, after it threatened to relocate if the merger was blocked.

The combined PSKY/WBD will not be required to sell off any of its linear networks as part of the settlement. However, it has agreed that it will negotiate the distribution of PSKY’s suite of basic cable channels separately from WBD’s for the next five years.

This measure was introduced to ensure the combined PSKY/WBD does not have disproportionate leverage over cable bundle providers during negotiations. Should it not comply, the combined company would be forced to sell BET, VH1, Comedy Central, Smithsonian, Destination America and Science Channel. There is, however, no mention of needing to divest itself of the more valuable cable brands, including MTV, Nickelodeon or the suite of Discovery channels.

The settlement with the WGA included a provision banning writer lay-offs at CBS News for five years, in addition to PSKY contributing US$17.5m to the guild’s health fund and paying its legal fees.

One area where PSKY has not been forced to make concessions is in its streaming business, meaning Ellison and his team should be able to move fairly swiftly towards their goal of combining Paramount+ and HBO Max, which have a combined subscriber base of 220 million.

While Monday’s announcement is, for good reason, focused on what PSKY is giving up in order to get the deal over the line, the close of the merger will also put workers at both companies on red alert as Ellison looks to find around US$6bn in cost savings.

PSKY has already cut more than 2,000 workers after Skydance acquired Paramount Global last year, and the cuts are expected to be even more severe this time around, particularly given the fact the new company will be carrying around US$80bn in debt.

The settlement comes 10 days before the “ticking fee” was set to come into force, on October 1. Under that deal provision, PSKY would have had to pay an additional US$0.25 per share per quarter (roughly US$7m per day or US$650m per quarter) if the deal did not close by September 30.

PSKY has repeatedly argued that its acquisition of WBD is pro-competitive and will create a scaled player that can go head to head with Netflix and the other tech giants involved in the content space.

The antitrust lawsuit was the final step in bringing the deal to fruition, after PSKY obtained approvals with more than 65 jurisdictions and regulatory bodies globally.