Paramount Skydance has asked a US court to require California and 11 other states, along with the Writers Guild of America, to post a nearly $1.9 billion surety bond to cover potential losses arising from their legal efforts to block its proposed merger with Warner Bros. Discovery.
The request was filed on Monday as the legal battle over the proposed takeover intensifies. Paramount argues that the plaintiffs should provide financial security because their lawsuits could delay completion of the transaction and expose the company to substantial costs.
At the centre of Paramount’s argument is a so-called “ticking fee” of about $7 million a day that the company is expected to pay Warner Bros. shareholders if the merger remains incomplete beyond October 1. Paramount says the delay caused by the litigation could leave it with about $1.3 billion in unrecoverable ticking fees by the time the case reaches its conclusion, in addition to financing costs and other losses.
The proposed $1.9 billion bond would cover those potential damages if Paramount ultimately wins the legal battle. A judge is expected to consider the request at a hearing on Wednesday, although it remains uncertain whether the court will impose a bond or approve the amount sought by Paramount.
The 12 states, led by California, are challenging the merger on antitrust grounds, arguing that combining the two major entertainment companies could give Paramount excessive control over areas including theatrical movie distribution and cable television programming. The Writers Guild of America has also filed a separate lawsuit opposing the deal.
Paramount, however, maintains that the proposed acquisition would strengthen competition and help it compete with larger technology and entertainment companies such as Disney, Netflix and Amazon.
California Attorney General Rob Bonta’s office has rejected Paramount’s demand, arguing that the company and Warner Bros. knowingly agreed to the ticking-fee arrangement as part of their merger deal. Bonta has also accused Paramount of attempting to pressure regulators into abandoning their opposition to the transaction.
The dispute comes after Paramount chief executive David Ellison warned that the company could move its headquarters out of California if Bonta did not negotiate over the lawsuit. Bonta described the threat as an attempt to pressure regulators.
Despite the legal challenge in the United States, the proposed merger has already received approval from several major regulators, including the US Department of Justice, the European Union and the United Kingdom. The outcome of the states’ lawsuit could now determine whether the multibillion-dollar transaction proceeds or faces further delays.
