Rumor has it that Paramount Sky Dance (PSKY.US) has reached a settlement with California and other state governments to remove important barriers to the acquisition of Warner Bros. Explore (WBD.US)

The Zhitong Finance App learned that according to people familiar with the matter, Paramount Sky Dance (PSKY.US) has reached a settlement with California and other states trying to prevent it from acquiring Warner Bros. Exploration (WBD.US), removing an important obstacle to this $110 billion deal, which is one of the largest mergers and acquisitions in Hollywood history. The relevant settlement agreement is expected to be officially announced late Monday local time. The media also quoted relevant reports to confirm that the settlement, if finally implemented, will remove one of the main legal obstacles faced by this deal.

People familiar with the matter said that the settlement negotiations reached a breakthrough this past weekend. Massachusetts, New York, Connecticut, and Minnesota, which had previously objected to the terms of the settlement drawn up with the California side, eventually made concessions.

These states have previously been the main opponents in a potential settlement. However, people familiar with the matter said that with California not continuing to take the lead in advancing lawsuits, other states finally believe that there is not enough reason to continue to bear the high cost of litigation.

According to reports, state lawyers worked all night to finalize the agreement. As part of negotiations over the past week, states that previously insisted on opposition have also obtained some additional conditions, including setting up separate editorial boards for CBS and CNN to strengthen the independence of news editors.

One of the core elements of this settlement is Paramount's previous commitment to distribute theatrical movies. According to people familiar with the matter, the relevant provisions require the merged company to distribute 30 movies in cinemas every year. If Paramount fails to meet this goal, it may be necessary to pay a $30 million fine for every fewer film released.

In addition, the negotiations also discussed stricter restrictions: if Paramount fails to meet the established theatrical distribution target, the company may even be required to sell its shares in the film production company Miramax. Miramax has participated in the production of famous films such as “Pulp Fiction.”

Earlier media reports said that potential concessions in discussions between Paramount and the California Attorney General also included investing about US$1.5 billion in film and television production in California and promising to preserve local production facilities. These conditions reflect that regulators are trying to reduce the risk of reducing the scale of film production and theatrical distribution after the merger of large film and television groups through enforceable restrictions.

In addition to film production and distribution, the independence of news editors from CBS and CNN was also one of the focuses of attention in this negotiation.

According to people familiar with the matter, the final plan includes arrangements to set up independent editorial boards for CBS and CNN. The previous negotiation plan also involved independent monitoring of CNN's content.

Paramount is the parent company of media assets such as CBS and MTV, while Warner Bros. Discovery owns important assets such as CNN, HBO, and Warner Bros. Film Studios. Once the deal is completed, the two companies' extensive film, TV, streaming and cable assets will be consolidated under the same group.

Therefore, in addition to traditional anti-monopoly issues, news business governance and editorial independence after the merger have also become important topics in the transaction review process.

Paramount announced in February this year that it had defeated Netflix (NFLX.US) in a bid and agreed to buy Warner Bros. Exploration for 110 billion US dollars. The deal will combine two historic Hollywood movie studios, two major subscription streaming businesses, and two major cable network operators, involving a range of well-known media assets such as CNN and HBO.

The deal has previously been approved by regulators such as the US Department of Justice and the Federal Communications Commission (FCC). The FCC approved foreign investment arrangements involved in the deal last week, but stipulated that foreign investors must not hold shares with voting rights, nor participate in company management or content decisions.

However, legal challenges from several US states have been an important obstacle before the deal is completed. The 12 state attorneys general, led by California, sued earlier in an attempt to block the deal, arguing that the merger of the two companies could weaken competition in the film and television markets and raise consumer prices. The Writers Guild of America (WGA) has also filed a separate lawsuit, arguing that the deal could lower the pay of film and television screenwriters and worsen working conditions. The relevant case was originally scheduled to be heard in March next year.

For Paramount, it also makes very direct financial sense to resolve state lawsuits as soon as possible.

According to the deal agreement, if the acquisition is not completed before September 30, Paramount will be required to pay Warner Bros. Discovery shareholders approximately $7 million a day in deferral fees starting October 1.

According to estimates previously submitted to the court by Paramount, if the lawsuit continues until next spring, the cumulative irrecoverable extension costs may reach about 1.3 billion US dollars.

Therefore, if the terms of this settlement are finally approved, it would not only remove a key legal obstacle to the deal, but could also help Paramount avoid millions of dollars of additional daily costs.

However, a settlement on the part of the state government does not mean that all legal disputes are over. The US Screenwriters Union also previously sued separately to block the deal. Currently, there is no information indicating that the union has joined this settlement.

California Attorney General Rob Bonta has previously said that compared to companies promising to take certain actions in the future, he is more inclined to resolve competition issues through structural remedies such as selling assets, because simple behavioral promises are often more difficult to implement.

As a result, recent negotiations revolved around a series of more binding conditions, including the number of theatrical films to be distributed, financial penalties for not meeting targets, and potential asset sales. The plan previously discussed even involved the sale of some cable TV channels.

Judging from the information disclosed so far, the core idea of this settlement is to restrict the merged media giants through measures such as film distribution promises, breach of contract penalties, and CBS and CNN editorial independence arrangements while allowing this huge merger and acquisition of 110 billion US dollars to continue.

If the final agreement is successfully approved, Paramount's acquisition of Warner Bros. Exploration will cross another critical threshold. Once completed, this deal will bring the two major Hollywood film studios and huge streaming, cable and news assets into the same group, and will further reshape the competitive landscape of the US film, television, and streaming media industry.