WBD rises 9.9% as Paramount is said to settle states' Warner Bros. suit

Paramount Skydance was reported Monday to have settled the 12-state antitrust case over its Warner Bros. Discovery takeover with independent editorial boards for CBS and CNN, a $30 million payment for each film below David Ellison's pledge to release 30 movies a year across the combined studios, and an additional $1.5 billion of film production over five years. California Attorney General Rob Bonta, who led the coalition, had said he would insist on structural remedies such as cable-channel sales.

A formal announcement was still expected later in the day. Neither Paramount nor Bonta had issued a confirming statement in the morning reports, and no settlement filing or dismissal order was in the public record.

The states sued over theaters and cable

The July suit, filed in federal court in California by the 12-state coalition, attacked the combination in wide-release theatrical distribution and basic-cable licensing. What Bloomberg and the New York Times described as the settlement is independent editorial boards at CBS and CNN, and a promise about how many movies get made.

Bonta has said he does not favor operating promises of that kind because they are hard to enforce, and that he prefers a sale of assets. Earlier talks had included possible cable-channel sales, including Comedy Central. A public settlement text, or the court order that would make one binding, has not been filed.

Four states that had been publicly resisting, Massachusetts, New York, Connecticut, and Minnesota, conceded over the weekend, Bloomberg reported. On Sunday, a person familiar with the talks told CNN that Connecticut Attorney General William Tong was "fighting to preserve the independence of CNN and CBS News." Rep. Ro Khanna of California had written that Paramount "should not own both CBS and CNN." A complete signatory list has not been published.

From a 12.6% discount to 45 cents

Warner Bros. Discovery was changing hands at $30.55 as of 11:55 a.m. ET Monday, $0.45 below the $31.00 cash Paramount agreed in February to pay. The stock was up 9.9%, volume was running at four times its average, and shares traded as high as $30.78, matching the 52-week high.

The merger agreement values the equity at $80.9 billion at $31.00 a share; Paramount's announcement put enterprise value at $110 billion. On Monday, July 13, the day the states sued, Warner Bros. Discovery closed at $27.09, a 12.6% discount to that cash. Friday's regular close was $27.80, still 10.3% below the offer. Monday's print leaves 1.5%.

Paramount's Class B shares were at $11.22, up 9.8%. Both stocks rose on the settlement reports. The cash offer is unchanged.

DOJ and the FCC are finished; the Writers Guild is not

The Justice Department's Antitrust Division closed its review on Friday, June 12, and said the transaction was not likely to harm competition in streaming, linear television, or theatrical film. Last week the FCC cleared a 49.5% foreign stake in Paramount's Warner Bros. takeover, limiting those investors to non-voting stock. Warner Bros. Discovery stockholders approved the merger on Thursday, April 23. Closing is not subject to a financing condition.

If Monday's reports hold and the states' case is actually dismissed, the remaining public litigation is the Writers Guild of America's separate July 14 suit, which the available reporting does not show as settled. Ordinary closing conditions still apply. The merger agreement's outside date is 11:59 p.m. ET on Thursday, March 4, 2027, with one automatic extension to Friday, June 4, 2027 if only the regulatory and governmental-order conditions are still open.

Miss that window because a governmental order blocks the deal, and Paramount owes Warner Bros. Discovery a $7.0 billion regulatory termination fee. Warner Bros. Discovery would owe Paramount $3.0 billion if it walks for a competing bid under the specified triggers. After Wednesday, September 30, extra days make the cash consideration more expensive, by as much as $0.25 a share each quarter.

Sector funds own a slice; merger-arb funds own the target

Most holders own Warner Bros. Discovery inside a communication-services sector fund, where it is a mid-single-digit weight. The S&P 500 communication-services fund AXLC, graded A by etf.net, holds a 4.45% WBD line. Vanguard's communication-services fund BVOX (B) and Fidelity's MSCI communication-services fund BFCOM (B) hold it at 2.59% and 2.56%. Two small funds own the stock on purpose as a cash-deal target: the NYLI Merger Arbitrage ETF BMNA (B) has WBD as its second-largest holding at 3.29%, and the AltShares Merger Arbitrage ETF BARB (B) lists it as its largest at 3.79%.

Monday priced a reported settlement of the last identified government block on the deal. It did not produce a filing.