Paramount surges 7% pre-market! Plans to spend $1.5 billion to secure California's approval, potentially clearing obstacles for its $81 billion Warner merger.

Paramount and Warner Bros.' proposed $81 billion merger is seeking to settle an antitrust lawsuit in California. Paramount and California Attorney General Rob Bonta recently began negotiations on a potential settlement, which includes a commitment to invest $1.5 billion in film and television production in California. Following the news, Warner Bros. shares rose over 7% in pre-market trading, while Paramount shares rose approximately 5.8%.

On September 21, according to The Wall Street Journal, the two sides held intensive talks over the weekend, discussing concessions that went beyond the $1.5 billion investment commitment, also covering issues such as studio assets, film output, and CNN's editorial independence. No final agreement has yet been reached.

This $81 billion merger has faced antitrust lawsuits from multiple states. In July, more than a dozen Democratic-governed states, led by California, filed a lawsuit arguing that the merger between Paramount and Warner Bros. could lead to further concentration of the theatrical film and cable television market. The Writers Guild of America also filed a lawsuit, arguing that the deal could affect the employment and career development of Hollywood screenwriters.

If a settlement is reached, the merger explored by Paramount and Warner Bros. will continue, bringing HBO, CBS, CNN, multiple streaming platforms, and well-known film studios under one umbrella.

Paramount expands its concessions, including both the studio and CNN in the negotiations.

According to reports citing sources familiar with the matter, Paramount has discussed a plan to remain in California without selling its studio sites. Previously, Paramount had considered relocating out of California amid increasing resistance to mergers and acquisitions.

Regarding content production, the two parties discussed Paramount's commitment to producing 30 films per year after the merger, as well as potential penalties for failing to meet this target, including being forced to sell its stake in Miramax. Miramax has produced films such as *Pulp Fiction* and *No Country for Old Men*.

In addition, the two sides discussed the sale of some cable television channels and a plan to establish an independent committee to ensure the independence of CNN's editors. CNN has been a sensitive issue in this deal, and Paramount had discussed establishing such an editorial committee before the lawsuit was filed.

Multiple state lawsuits coupled with high transaction costs put time pressure on settlement.

In addition to the lawsuit itself, pressure for a settlement is also mounting from local governments, theater operators, and Hollywood labor unions. California Governor Gavin Newsom, Los Angeles Mayor Karen Bass, and gubernatorial candidate Xavier Becerra have all recently called on both sides to resolve the dispute as soon as possible.

The longer the transaction lasts, the higher the costs for Paramount. According to the agreement between the two parties, from next month until the transaction is completed, Paramount will need to pay Warner shareholders approximately $650 million per quarter in "time fees," which is about $7 million per day.

Meanwhile, Paramount has filed for federal court to request approximately $1.9 billion in security deposits from states and the writers' union to block the deal. If successful, these funds will belong to Paramount. As the litigation continues, the accumulating time and financial costs further increase the pressure on both parties to reach a settlement.

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