The Paramount and Warner Bros. deal is no longer at risk of collapsing — Freedom

Settlement of Paramount Skydance’s (PSKY) dispute with several U.S. states has removed one of the last key obstacles to the acquisition of Warner Bros. Discovery (WBD), Freedom Broker analysts note. The reduction in regulatory uncertainty supported Warner Bros. Discovery shares, although further performance will depend on the deal’s final closing.

A key obstacle to the Paramount and Warner Bros. deal has been removed

Paramount Skydance combines the Paramount Pictures film studio, the CBS television network, and the Paramount+ streaming service. Warner Bros. Discovery owns the Warner Bros. studios, the HBO Max platform, and the CNN television network.

Paramount reached an agreement with California and 11 other states that were seeking to block the acquisition of Warner Bros. Discovery over concerns about reduced competition. A parallel dispute was settled by the Writers Guild of America. The settlement will remove one of the last key obstacles to completing the merger, Freedom Broker experts believe.

After that, Paramount’s management said the company had received all the necessary approvals and expects to close the deal in about two weeks.

Against the backdrop of the news, Warner Bros. Discovery shares on September 21 rose by more than 10%. Paramount shares also gained at the start of trading, but later pared the advance and lost nearly 3%. 

Paramount accepted the authorities’ terms

Under the terms of the agreement, Paramount must additionally direct $1.5 billion to film production in the U.S. over five years. The company committed to releasing 30 films in each of the first two years after the combination and 32 in each of the following three years.

At least four annual releases must be independent films, and at least 20% must be big-budget projects. Failure to meet the required number of releases will result in a $30 million fine for each missing film. Paramount also agreed not to raise fees for movie theaters for three years and to create a special board that will oversee the editorial independence of CBS and CNN.

The deal is expected to close in the coming weeks

The value of the acquisition of Warner Bros. Discovery is about $110 billion. The combined company will gain a large portfolio of film studios, TV channels, streaming platforms, and entertainment franchises.

Paramount expects the merger to cut costs by about $6 billion. At the same time, the combined company’s total debt could amount to about $80 billion. Closing the deal by the end of September will allow Paramount to avoid additional payments to Warner Bros. Discovery shareholders of $7 million for each day of delay.

The agreement has already received approval from regulators in the U.S., the U.K., and the European Union. After settling the states’ claims and the Writers Guild’s dispute, no major legal obstacles to closing the deal remain.

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