Paramount Skydance and California's attorney general are negotiating a settlement over the Warner Bros. Discovery merger that would leave the deal structurally intact, trading a proposed CNN sale for content-monitoring and release commitments. The shift comes as a daily fee owed to Warner Bros. Discovery shareholders makes further delay costlier than the concession itself.
Five weeks ago, Paramount Skydance was ready to sell CNN to end its fight with California over the Warner Bros. Discovery deal. The terms now on the table are far cheaper: independent monitoring of CNN and a commitment on theatrical release counts are what's being negotiated, and nobody is selling anything.
The price of peace fell
California Attorney General Rob Bonta has said structural remedies, meaning divestitures, protect competition better than promises to behave. Monitoring and release quotas are promises to behave, so on these terms Paramount keeps the company whole.
The sides also discussed operating the two studios separately for a period rather than merging them immediately — a delay, not a divestiture. A Paramount spokesperson declined to comment, and the California Department of Justice said the talks remain confidential.
A ticking fee reshaped the calendar
Paramount agreed on Feb. 27 to buy Warner Bros. Discovery for $31.00 a share in cash, valuing it at $81 billion in equity and $110 billion including debt. The Justice Department cleared the deal in June, twelve states sued in July, and a court stipulation pushed the outside closing date to June 2027.
The merger agreement adds a fee for every day past Sept. 30: Paramount owes Warner Bros. shareholders $7 million a day until the deal closes, roughly $650 million a quarter. A March 2027 trial could add up to $1.3 billion in fees before a verdict. Paramount has also asked the states to post a $1.88 billion bond, with a hearing set for Sept. 24.
Markets price in a resolution
Paramount Skydance closed Friday at $10.21, down about 3.9% on the session. It then rose 7.6% after hours on the settlement reports. Warner Bros. Discovery gained 8.3%. It closed roughly 10% below its $31 cash-deal price, a gap Friday night's move largely erased.
Acquirers usually fall when a contested deal firms up, because certainty means paying more. But Paramount rose instead, because further delay now costs more than the concession does.
Analysts have not caught up
Nineteen analysts polled by S&P Global rate Warner Bros. Discovery a consensus Hold with an average 12-month target of $29.82, below the contracted $31 — a discount for the chance the deal collapses, not a valuation call. UBS carries a $31 target while Bank of America sits at $24, showing how wide the disagreement runs.
For investors, the upside is capped near $31 plus accrued fees, while the downside if talks collapse is the unaffected price the deal replaced. A settlement could come as soon as this weekend, though a union spokesperson would not say whether the Writers Guild's separate pay lawsuit is part of the current talks.
Source: TheStreet
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