Warner Bros. Discovery shares jumped roughly 11% on Monday after Paramount Skydance reached a settlement with California and 11 other states that had sued to block its $110 billion acquisition, removing one of the largest remaining legal obstacles to the deal.
WBD traded around $30.80 during the U.S. session, up roughly 10.8% from Friday’s $27.80 close. That left the stock only about $0.20, or less than 1%, below Paramount’s $31-per-share cash offer.
Reuters separately reported Warner Bros. Discovery up more than 10% after the settlement was confirmed. Earlier in the day, the shares had been up 7.2% in premarket trading according to Investing.com and 7.9% in Reuters’ early market read, showing the rally accelerating as the legal outcome became clearer.
California and 11 Other States Have Settled
California Attorney General Rob Bonta announced the agreement Monday after weekend negotiations with Paramount. California had led a coalition of 12 state attorneys general that sued in July, arguing the combination would reduce competition in film and television.
The coalition included New York, Connecticut, Massachusetts and Minnesota. Those states had not initially been unified behind the proposed settlement. CNN reported Sunday that New York Attorney General Letitia James was seeking additional worker protections, while Connecticut and other states still had reservations. Bloomberg subsequently reported that Massachusetts, New York, Connecticut and Minnesota accepted the agreement over the weekend.
The final settlement requires Paramount to increase domestic film-production spending by at least $300 million annually for five years, equivalent to at least $1.5 billion in additional spending.
Paramount also committed to release 30 theatrical films in each of the first two years after closing and 32 in each of the following three years. Falling short carries a $30 million penalty for each missing film, with most of that money directed toward worker-support funds.
A new editorial-independence board will oversee protections for CNN and CBS News. Paramount also agreed not to increase rates charged to theater operators for three years.
Bonta described the agreement as a “strong antitrust outcome” while making clear that settling the case did not amount to endorsing the merger.
Paramount Has a $7 Million-a-Day Reason to Close Quickly
The settlement also matters because Paramount is approaching a costly deadline.
Under the merger agreement filed with the SEC, Warner Bros. Discovery shareholders begin receiving a ticking fee equivalent to $0.25 per share per quarter, calculated daily, if the transaction remains unfinished after September 30.
Reuters puts that obligation at approximately $7 million for every additional day before closing.
The $31 cash offer also carries a $7 billion regulatory termination fee if regulatory problems prevent the acquisition from being completed.
That makes September 30 an economic deadline rather than simply another date in the merger timetable. With the states’ case resolved, Paramount now has a substantial incentive to finish the remaining steps before the daily payments begin.
Most Regulatory Clearances Were Already Finished
The state lawsuit had become unusually important because most conventional regulatory reviews were already complete.
Paramount said in August that it had secured the required approvals across 68 countries, including the U.S. Justice Department, European Union, UK, China, Canada and Australia. By September 8, the company described the state case and a separate Writers Guild of America lawsuit as the two remaining barriers to closing.
Both have now moved toward resolution. Reuters reported Monday that the Writers Guild also settled its parallel lawsuit, although the union said it continues to believe the transaction will hurt writers and the wider industry.
The episode comes amid broader scrutiny of large U.S. combinations. FinanceFeeds has also covered state-level opposition to Western Union’s proposed acquisition of Intermex, another example of competition challenges continuing after companies announce major transactions.
The Paramount-Warner Bros. transaction itself is not formally closed yet. The state settlement still requires judicial approval and the remaining closing procedures must be completed.
But the market is now pricing in far less deal risk than it was on Friday. With WBD trading within roughly 1% of Paramount’s $31 offer, shareholders are treating the settlement as a major step toward converting that bid into cash.