Paramount Skydance Corp. has successfully settled lawsuits filed by 12 state attorneys general and the Writers Guild trade union, which had sought to block its proposed acquisition of Warner Bros. Discovery Inc. This agreement, reached over the weekend, removes the final major hurdle for the $110 billion merger, paving the way for one of Hollywood's largest-ever deals. The settlement includes provisions to mitigate concerns about the combined company's market power and ensure the editorial independence of the new media giant, which will control two major studios, two significant streaming services, and numerous TV channels from CBS to HBO.
The settlement, expected to be officially announced soon, stipulates that the combined company must release at least 30 films annually for the first two years and 32 films for the subsequent three years. A minimum of 20% of these releases must be "tentpole" or blockbuster films. Additionally, the agreement mandates separate negotiations for basic cable channel agreements and requires investment in an independent film fund. For California, a key provision prohibits selling or closing Paramount’s Melrose Avenue lot or the Warner Bros. lot in Burbank, ensuring they operate consistent with past practices. A judge's approval is still required for the five-year settlement agreement.
Despite the clear path for the merger, significant financial challenges remain. The combined entity is projected to have an $80 billion debt load, which analysts estimate will be approximately 6.5 times its EBITDA. This debt level raises concerns, especially given that both Discovery and AT&T faced issues with high debt during their previous ownership of Warner Bros. Fitch downgraded Paramount’s debt to a "junk" rating (BB+) in March, while S&P also lowered its rating, and Moody’s is reviewing it for a potential downgrade. Paramount CEO David Ellison and his executives, however, assert they can reduce the debt to three times EBITDA within three years, banking on an estimated $6 billion in post-merger synergies.
