A federal judge approved Paramount’s antitrust settlement with California and 11 other states Wednesday, removing the final major legal obstacle to its acquisition of Warner Bros. Discovery and allowing the Hollywood megadeal to close in early October.
By yourNEWS Media Newsroom
Paramount Skydance can move forward with its acquisition of Warner Bros. Discovery after a federal judge approved a court-enforceable antitrust settlement Wednesday, ending a months-long legal hold on one of the largest media mergers in U.S. history.
U.S. District Judge Araceli Martínez-Olguín approved the agreement between Paramount and a coalition of 12 states led by California, clearing the companies to complete a transaction valuing Warner Bros. Discovery at $81 billion in equity and approximately $110 billion in enterprise value.
Paramount is expected to close the deal in early October, bringing Warner Bros., HBO, CNN and HBO Max together with Paramount Pictures, CBS, MTV and Paramount+ under one corporate parent.
Martínez-Olguín determined that the consent decree reached by the companies and the states represented a reasonable resolution of the antitrust dispute, despite objections from critics who argued the conditions did not go far enough to prevent consolidation in Hollywood.
The ruling removes the legal barrier created after California Attorney General Rob Bonta and attorneys general from 11 other states sued in July to stop the merger.
The states argued that combining Paramount and Warner Bros. Discovery would eliminate competition between two of Hollywood’s five major film distributors and two of the largest owners of basic cable programming.
California estimated that the combined company would control nearly one-third of U.S. theatrical film distribution and nearly one-third of basic cable programming. The lawsuit alleged that the merger could reduce film and television production, weaken competition for creative workers and give the enlarged company greater leverage over movie theaters and cable distributors.
The companies agreed in July not to close the transaction until June 1, 2027, or until the court ruled on the states’ challenge, whichever came first. Wednesday’s order satisfies that condition and allows the transaction to proceed.
The settlement approved by the court imposes a series of requirements on the combined company for five years.
Paramount must release at least 30 films annually during the first two years following the merger, including at least 20 wide theatrical releases each year.
For years three through five, the minimum rises to 32 films annually, including at least 21 wide releases.
At least four independent films must be released during each year of the five-year period.
The commitments are backed by financial and structural penalties.
If Paramount fails to meet the annual film-output requirement, the company could be required to divest Miramax and pay $30 million for each film by which it misses the required production target. The money would be directed partly toward union health and retirement funds and partly toward additional antitrust enforcement.
Paramount also agreed to spend at least $1.5 billion more on U.S. film production over five years than it spent domestically in 2025.
That amounts to a minimum additional $300 million per year in American production spending.
The company further agreed to maintain its Paramount Pictures lot on Melrose Avenue in Los Angeles and Warner Bros.’ studio property in Burbank rather than closing or selling those facilities during the settlement period.
The agreement also creates a $47.5 million fund intended to support entertainment-industry workers affected by the merger through workforce training, career development, film programs and community arts organizations.
Paramount must honor existing collective bargaining agreements and continue bargaining in good faith with entertainment unions.
Another provision seeks to preserve competition in negotiations with cable and television distributors.
Although Paramount and Warner Bros. Discovery will be owned by the same company, the settlement requires their cable businesses to negotiate certain distribution arrangements separately, effectively maintaining some of the negotiating competition that existed before the merger.
The combined company will also establish a five-member News Editorial Independence Board covering CNN and CBS News.
The board is intended to address disputes involving journalistic standards and protect what the settlement describes as independent, objective and fact-based reporting at both networks.
The proposed editorial board generated criticism during the court’s review, with some media advocates questioning whether an oversight body whose members ultimately operate within the corporate structure would have sufficient independence.
Martínez-Olguín heard objections to the settlement before approving it Wednesday but concluded those disagreements did not establish a legal basis for rejecting the agreement.
Bonta emphasized when announcing the settlement Sept. 21 that California’s decision to resolve the lawsuit should not be interpreted as an endorsement of the merger itself.
“This settlement is not a vote of support for this merger,” Bonta said when announcing the agreement.
His office said the states instead determined that enforceable commitments on film production, employment, cable negotiations and other issues provided protections that could be secured without continuing lengthy litigation.
The state lawsuit had represented the most significant remaining antitrust challenge to the transaction.
The U.S. Justice Department reached a different conclusion earlier in the year.
After an eight-month investigation, the Justice Department’s Antitrust Division announced June 12 that it did not believe the Paramount-Warner Bros. combination was likely to harm competition or American consumers in streaming, linear television or theatrical film production and distribution.
Federal antitrust investigators reviewed more than 2 million documents from more than 80 custodians, along with company data, executive testimony and submissions from other participants in the entertainment industry before closing the investigation without attempting to block the transaction.
The department also examined concerns that consolidation could reduce demand for writers, actors and other creative workers but concluded the evidence did not support an actionable antitrust case on that theory.
The state attorneys general nevertheless pursued their own challenge the following month.
Paramount originally announced its agreement to acquire Warner Bros. Discovery in February.
Under the transaction, Warner Bros. Discovery shareholders are to receive $31 per share in cash, plus an additional payment tied to delays beyond Sept. 30.
The agreement values Warner Bros. Discovery at approximately $81 billion on an equity basis and $110 billion when debt and other enterprise-value considerations are included.
Financing includes approximately $47 billion in new equity backed by the Ellison family and RedBird Capital Partners, along with tens of billions of dollars in debt commitments.
Paramount has projected more than $6 billion in eventual cost savings and operating efficiencies from combining the two companies.
Those efficiencies are expected to come from areas including technology consolidation, corporate operations, procurement, real estate and the integration of streaming infrastructure.
The combined company would control an extensive collection of entertainment properties.
Paramount brings Paramount Pictures, CBS, Paramount+, MTV, Nickelodeon and franchises including “Top Gun,” “Mission: Impossible” and “SpongeBob SquarePants.”
Warner Bros. Discovery contributes Warner Bros. Pictures and Television, HBO, HBO Max, CNN, DC Studios, Discovery and franchises including “Harry Potter,” “Game of Thrones” and the DC Universe.
The merger also brings two of the largest U.S. streaming platforms under common ownership, although the Justice Department concluded the streaming market remains sufficiently competitive to prevent the deal from violating federal antitrust law.
Leadership changes are already being prepared for the combined company.
Mattel CEO Ynon Kreiz has been selected to join Paramount as co-CEO alongside David Ellison following completion of the transaction, giving the former television executive and longtime entertainment-industry leader a senior role in integrating the two companies.
Kreiz led Mattel during its expansion into entertainment and intellectual-property development, including the blockbuster “Barbie” film.
Wednesday’s ruling ends the immediate legal uncertainty surrounding whether Paramount could complete the takeover.
The settlement does not eliminate concerns raised by unions, consumer advocates and some lawmakers over possible job losses, further consolidation of film and television production and the concentration of major news organizations under a single corporate owner.
Those issues will now shift largely from whether the deal can occur to whether Paramount complies with the court-enforceable conditions attached to it.
The settlement gives the states authority to return to court if Paramount violates its obligations.
For the companies, however, the central question hanging over the transaction since July has been resolved.
With Martínez-Olguín’s approval, Paramount is no longer barred from closing its acquisition of Warner Bros. Discovery, setting the stage for the formation of a media company spanning two historic Hollywood studios, major broadcast and cable networks, streaming platforms and some of the entertainment industry’s most valuable franchises.
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