Key Highlights

  • Paramount Skydance is asking a judge to require the states challenging its Merger with Warner Bros. Discovery to post a $1.88 billion bond covering delay-related costs
  • A dozen state attorneys general led by California filed to challenge the proposed $110 billion merger in July under the Clayton Antitrust Act
  • Paramount agreed to a ticking fee under the merger agreement, paying Warner Bros. Discovery shareholders an additional amount per share each quarter until the deal closes
  • A trial between Paramount and the state attorneys general is scheduled for March, with the merger's closing potentially delayed until as late as June 2027

Paramount Seeks Bond to Cover Delay Costs

Paramount Skydance (NASDAQ:PSKY) will seek to force the states holding up its merger with Warner Bros. Discovery (NASDAQ:WBD) to pay for the fees and costs associated with the delay, according to a new court filing this week in the ongoing antitrust case. Paramount is requesting a $1.88 billion bond be posted by the states behind the lawsuit. In July, a dozen state attorneys general led by California's attorney general filed to challenge the proposed $110 billion merger between the two media companies.

The proposed deal would combine two storied film studios, along with a sprawling portfolio of pay-TV networks and streaming platforms, into a single company. The group of state attorneys general said in its initial filing that the merger would violate the Clayton Antitrust Act, the more than century-old law that prohibits anticompetitive mergers and acquisitions.

Companies Point to Federal Law Requiring Security Bond

A Paramount spokesperson pointed to the Clayton Antitrust Act and other federal law provisions that call for plaintiffs, or states in this case, to post a bond covering the potential harm from halting a transaction while litigation proceeds. The company said in its statement that every month of delay carries substantial and quantifiable financial consequences. A representative for the California attorney general's office responded that Paramount went into the process with eyes wide open, adding that the company is lying in a bed of its own making.

Paramount has received regulatory approvals from the Antitrust Division of the Department of Justice as well as all other global jurisdictions required to move forward with the merger. Last month, Paramount agreed to delay the proposed Acquisition to as late as June 2027 while the states' case proceeds toward trial, after long planning to close the deal by the end of September.

Ticking Fee Adds Cost Pressure to Delayed Deal

Paramount agreed to a so-called ticking fee under the terms of the merger agreement, meaning that beginning September 30 it will pay Warner Bros. Discovery shareholders an additional 25 cents per share, per quarter, until the deal closes, an amount that could add up to roughly $650 million in cash value per quarter. Paramount said in its filing that by the time the trial concludes and the parties submit their final briefs, the company will have paid Warner Bros. Discovery shareholders an unrecoverable $1.3 billion in ticking fees alone.

The filing states that absent security, even a complete victory on the merits would not restore a dollar of those extraordinary losses, arguing that is precisely why federal law requires plaintiffs to provide security as a condition for receiving preliminary relief such as the court-approved delay order.

States Push Back on Bond Request

A representative for California's attorney general's office said in a statement that Paramount and Warner Bros. Discovery are two sophisticated companies that willfully decided to include a costly ticking fee provision in their merger contract, knowing the deal would undergo regulatory review and was not guaranteed. The statement added that Paramount itself stipulated to the delayed timeline it is now protesting, agreeing to the dates without requesting a bond as a condition of the agreement, and is now trying to reverse that decision.

In its own filing, Paramount said the $1.88 billion figure represents a straightforward calculation of the maximum potential ticking consideration and financing costs stemming from the litigation, adding that the delay also threatens to nullify regulatory approvals the companies have already spent months securing and prevents integration and Investment in content, production and creative talent by the combined company. In addition to California, the group of states suing to block the merger includes Arizona, Colorado, Connecticut, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon and Washington.