Supreme boss David Ellison, after a year-long bitter battle, is finally close to getting his hands on Warner Bros. Discovery – in the most expensive buyout in Hollywood history.
On Wednesday, U.S. District Judge Araceli Martínez-Olguín, who is overseeing the antitrust case seeking to block the Paramount-Warner Bros. deal, approved Paramount’s settlement with the 12 Democratic attorneys general who brought the case to resolve the dispute.
Paramount has tentatively set the closing date for the merger on Tuesday, October 6, according to regulatory filings.
The order approving Martínez-Olguín’s settlement was the final hurdle in Paramount’s $111 billion merger with Warner Bros. Discovery, fueled by debt, after it was cleared by regulators in 68 jurisdictions around the world, including the Department of Justice.
“(T)he Court finds that the proposed consent decree represents a reasonable factual and legal resolution of the dispute,” Martínez-Olguín wrote in his order. She determined that the proposed settlement agreement “reflects a robust procedural resolution.”
“The parties reached their agreement after much contentious litigation, however brief, and they reached their agreement following what they consider to have been several rounds of extensive negotiations,” the judge wrote.
The Paramount-WBD merger will bring together two of Hollywood’s biggest movie studios; streaming services HBO Max and Paramount+; and television companies including CBS, CNN, MTV, TBS, Comedy Central, Food Network and more. The new company’s entertainment franchises will span Harry Potter, HBO’s “Game of Thrones” and other hits, the DC Universe, “Yellowstone,” “Mission: Impossible,” “Top Gun” and Nickelodeon’s Children’s Empire.
Some of the soon-to-merge company’s top executives, whose names have yet to be revealed, are already taking shape.
On Wednesday, it was reported that Ellison had recruited Ynon Kreiz, who is leaving his post as CEO of Mattel, for a management position within the Paramount-WBD combination. Casey Bloys, head of HBO at WBD, is set to take over oversight of the combined Paramount-Warner Bros. streaming business. after Cindy Holland announced Tuesday that she was stepping down from her role leading Paramount+ and other direct-to-consumer services.
Once the deal was completed, the CEO of Warner Bros. Discovery, David Zaslav, should leave. Zaslav stands to earn more than $550 million in stock and cash once the Paramount-WBD deal closes, including $34.2 million in cash severance. Other senior WBD executives expected to leave include Bruce Campbell, chief revenue and strategy officer, and Gunnar Wiedenfels, chief financial officer.
Martínez-Olguín’s decision came after opponents of the merger filed formal objections with the court over Paramount’s settlement with the states. The consent decree does not provide for any structural remedies (i.e. divestitures) as previously insisted by California Attorney General Rob Bonta, who led the coalition of states in suing to stop the impending merger.
Among the terms of the settlement: Paramount-WBD has no right to sell any Paramount Studios or Warner Bros. lots. in the state for at least five years, and is required to invest at least an additional $300 million per year in film production in the United States. The Paramount-WB combination must also release at least 30 films for theatrical distribution in the first two years (which Ellison has repeatedly promised he would do) and at least 32 in years 3 through 5, with a 45-day window for wide release films. The Paramount-Warner Bros. merger will also be subject to oversight by a “news editorial independence committee,” which will establish “editorial and journalism guidelines” for CNN and CBS News.
Asked by the judge last week about how the settlement addresses state AGs’ concerns about fair competition in the three markets identified in the lawsuit — mass-release films, tentpole films and basic cable — Paula Blizzard, principal assistant attorney general in the antitrust section of the California attorney general’s office, said the reasoning was that states were reluctant to permanently block the Paramount-WBD deal — and she said Warner Bros.’ Discovery, if denied the merger deal with Paramount, would likely seek another. M&A partner. “Sometimes we say, here are some remedies that will address the damage we see, but won’t permanently change the structure by completely blocking the merger or (requiring) divestment, and this is one of those cases,” Blizzard told the judge.
In her order, Martínez-Olguín wrote that she considers the proposed consent decree “includes important safeguards requiring divestment from studios and/or cable channels in the event of failure by the combined entity to comply with the terms of the proposed consent decree. Furthermore, the proposed consent decree imposes these requirements on film distribution and basic cable negotiations in the midst of a rapidly changing market. The Court therefore finds that the proposed consent decree reflects a settlement between the parties that is an approach fair, reasonable and in good faith to resolve the competitive harms alleged in the complaint and do not violate the law or public policy.
The groups behind the #BlockTheMerger coalition, for example, filed an amicus brief with the court, urging Martínez-Olguín to reject the settlement. The League of United Latin American Citizens also raised objections to the deal in a filing, saying the Paramount-WBD group would potentially invest less in productions about black and Latino communities than two competing independent studios would.
Previously, the judge also left the door open for possible additional third-party review of the settlement: Martínez-Olguin asked the attorneys general and Paramount to respond to a letter submitted by Sen. Cory Booker (D-N.J.) “to urge the Court to subject the proposed consent decree to an independent public interest review before accepting it.” In separate filings Monday, Paramount and the attorneys general countered that the deal was vigorously negotiated, had “teeth” and should not be subject to an independent “public interest” review. Paramount’s lawyers argued that the deal resolves the AG’s main concern about a reduction in theatrical releases after the merger with Warner Bros. Discovery.
Martínez-Olguin noted that parties opposing the settlement “expressed dismay at many of the provisions of the proposed consent decree. However, a proposed consent decree like this represents a negotiated settlement that does not fully remedy an alleged violation or even necessarily resolve the ultimate factual and legal issues of a case.”
“(T)he Court recognizes that this proposed consent decree reflects a compromise on the claims without reaching a complete judgment – a compromise that may leave both parties and the public with some dissatisfaction, but a compromise that saves the risk, time and expense of litigation,” the judge wrote.
Martínez-Olguin wrote that there are “serious grounds for disappointment with the proposed consent decree.” She cited Booker’s letter here referencing Connecticut Attorney General William Tong’s statement that his state had pushed for a complete divestiture of CNN and CBS News and was “deeply disappointed” that the settlement did not go further. “But these hopes and desires that the proposed consent decree would go further – to achieve more – do not rise to the level of legal violations upon which the Court can reject the resolution negotiated by the parties,” the judge wrote.
Gn bussni
