Paramount Skydance has secured a settlement with 12 US states that attempted to block its $110 billion (£80 billion) takeover of rival film studio Warner Bros Discovery.
The agreement clears one of the final hurdles to a major consolidation that will reshape the entertainment industry across film, television, streaming, and news broadcasting.
Under concessions negotiated by opponents led by California Attorney General Rob Bonta, Paramount agreed to create independent editorial boards for news network CNN, owned by Warner Bros, and Paramount's own broadcast network CBS.
Paramount also committed to paying financial penalties if it fails to meet a pledge to release 30 new movies a year. Settling the state lawsuit enables Paramount to avoid a daily $7 million (£5.2 million) ticking fee owed to Warner Bros shareholders for every day completion extends past September 30.
Paramount Pictures, founded in 1912 and based in Los Angeles, is one of Hollywood's oldest major studios. Its classic catalogue includes blockbusters such as The Godfather, Titanic, Top Gun, and Top Gun: Maverick. Warner Bros Discovery, another entertainment powerhouse, controls an extensive slate of film properties ranging from classics like The Wizard of Oz and Casablanca to global hits including Barbie and the Harry Potter franchise.
State opposition and regulatory approvals
The state coalition sued in July to stop the merger, contending that combining the two media giants would reduce competition and allow the unified company to raise prices for movies and television programs.
Despite the state opposition, the takeover has already received clearance from federal regulators under Donald Trump's administration in the United States. Competition authorities in other major international jurisdictions, including the European Union and Britain, have also approved the deal.
Paramount previously secured control of the transaction after defeating a competing acquisition bid for Warner Bros from streaming service Netflix earlier this year.
Financial markets reacted positively to news of the state settlement. Shares in Paramount rose 8 per cent following the announcement, while Warner Bros shares gained more than 10 per cent.
Dan Coatsworth, head of markets at financial firm AJ Bell, said: "A takeover saga which has had more twists and turns than your average Mission: Impossible film looks to be inching closer to a resolution."
Coatsworth added: "Assuming Paramount can get the deal over the line it will become a materially bigger beast in a competitive entertainment market, having seen off Netflix's rival bid earlier this year. Though whether bigger will translate into better remains to be seen, given more than a fair share of blockbuster mergers have bombed in the past."
Trade union lawsuits and remaining steps
The state settlement does not resolve all legal challenges surrounding the merger. The Writers Guild of America, the labor union representing screenwriters across film and television in the United States, has filed an active lawsuit to halt the acquisition.
The union warned in July that a combined Paramount and Warner Bros entity would possess both the incentive and the ability to cut costs by suppressing writers' wages and reducing overall production output.
Industry analysts anticipate the union challenges will ultimately be resolved. Morningstar analyst Matthew Dolgin said: "The final hurdle will be some trade unions that also have a similar lawsuit outstanding, but they'll be hard pressed to hold up this deal. I think the unions would have a very low probability of winning their case, so I'd expect that to get settled also."
