Paramount Settles With California and 11 States, Clearing a Last Big Hurdle to the Warner Bros. Deal

Warner Bros. Discovery surged more than 10% on Monday while Paramount Skydance rose more than 5% after Paramount settled with California and 11 other states that sued to block its $110 billion acquisition of Warner Bros. Discovery, Reuters reported, clearing one of the last big hurdles to closing a deal that would reshape Hollywood.

The settlement, reported by Reuters' Jody Godoy on Monday citing a source familiar with the matter, carries two concessions aimed at the deal's most politically sensitive assets: independent editorial boards for the CNN and CBS news operations, meant to safeguard newsroom independence under a single owner, and a $30 million penalty for every film Paramount falls short of its pledge to release 30 movies a year in theaters.

The breakthrough came when four states that had opposed the California terms — Massachusetts, New York, Connecticut and Minnesota — conceded after weekend negotiations, Bloomberg News reported, citing a person familiar with the matter. The settlement is expected to be announced later Monday. New York had been demanding stricter job protections and competition remedies, and its concession signals the coalition's price stopped rising.

The Wall Street Journal reported Sunday that the sides had discussed a $1.5 billion investment in California film and television production and a commitment not to sell either company's studio lot — direct answers to the job-loss fears driving the states' case. Paramount, Warner Bros. Discovery and California Attorney General Rob Bonta's office did not immediately respond to Reuters' requests for comment on the settlement.

What the settlement does not yet resolve: there is still no official announcement, and the exact written terms are unknown. A Writers Guild of America challenge to the deal remains outstanding, and the merger still faces a March 2027 trial date if the states' suit is not formally dismissed. But with the European Union and Britain already clearing the acquisition and Trump administration regulators having signed off, the states' case was the last major American courtroom between Paramount and Warner Bros. Discovery.

The suit, filed in July by a coalition of 12 state attorneys general led by Bonta, argued the merger would reduce competition and hand a combined company the power to raise prices across movies and television. Under the merger agreement, Paramount's $31-per-share cash bid values the equity at about $81 billion, roughly $110 billion including debt — and every day the deal stays unclosed past September 30 costs Paramount $7 million in ticking fees to Warner Bros. shareholders.

For investors, Monday's rally is a bet that the weekend's handshake survives contact with the official announcement. If it holds, the industry's biggest consolidation in years gets its closing date — two Hollywood studios, two streaming services and two of the country's largest news operations under one roof.