A plan that would hold Warner Bros. Discovery separate from Paramount Skydance through the end of potential litigation may be the key in ending a standoff between the Hollywood studio and California Attorney General Rob Bonta, allowing the stalled $110 billion merger to proceed, TheWrap has learned.
The maneuver, called a “hold separate,” would provisionally allow the merger to proceed while litigation challenging the deal as a breach of antitrust laws could make its way through the courts. Doing so would allow Paramount to avoid the painful ticking fee that begins on Oct. 1 and move the merger forward. But if the AGs’ litigation were to prevail, the deal would have to unwind.
Still, this move may be the key to getting to a compromise over what has been a stubborn standoff between Bonta and Paramount for weeks. Negotiations between the two sides kicked off on Friday and seemed to quickly lock in to a path toward resolution.
Other measures being discussed include an independent oversight board that would ensure independence for CNN and CBS News and assure the production of 30 films per year, as Paramount CEO David Ellison has promised, as has been reported in numerous outlets.
A Paramount spokesperson had no comment when reached by TheWrap.
There is a precedent in media mergers for the “hold separate” move involving Warner, or at least its predecessor: AT&T voluntarily entered into a hold separate agreement with the Department of Justice over acquiring the Turner cable channels as part of its bid to buy Time-Warner in 2018. This allowed the deal to close while the legal battles continued; the DOJ ultimately lost the case and the Turner Broadcasting division was folded into the corporation.
(Ironically, AT&T eventually sold off WarnerMedia to Discovery in 2022.)
Sources on both sides of the negotiation told TheWrap late Saturday that talks were continuing and a deal was within reach. “It will be done by Tuesday,” said one insider in touch with the principal parties, though this person acknowledged many details could derail what appears to be momentum to settle the lawsuit.
Among those details is disagreement among the 12 Attorneys General who are suing Paramount over antitrust concerns to block the merger. While Bonta is under intense pressure from fellow state Democrats including Governor Gavin Newsom and L.A. Mayor Karen Bass to settle, due to Paramount’s threat to leave California, not all are in agreement to settle the suit. New York AG Letitia James and AGs from two other states are disinclined to settle, according to a knowledgeable insider. Any concessions won by Bonta about California would not benefit the other states.
The settlement is an attempt to address concerns that the combination of the two historic studios would have a devastating impact on both the local economy and the entertainment industry as a whole. Paramount has insisted the deal would lead to more opportunities and give it a better fighting chance against the tech giants.
Starting Oct. 1, Paramount is on the hook to start accruing a 25 cent per share ticking fee, which translates to a payout of $650 million per quarter or $7 million per day until closing, giving it extra motivation to settle quickly.
The Los Angeles Economic Development Corporation estimated that Paramount moving out of the state could result in the loss of up to $21.2 billion in annual economic output, 57,980 full-time jobs and $1.17 billion in state and local tax revenues.
Meanwhile, an analysis ordered by the LA County Board of Supervisors estimates that the merger closing could put 4,500 local TV and film jobs and over 5,800 indirect or induced jobs from related small businesses at risk over the next three years. The economic impact of losing these jobs would be $1.26 billion in wages, $2.78 billion in economic value.
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