Paramount Seeks $1.88 Billion Bond to Cover Costs of WBD Merger Delay

A high-stakes battle is brewing between Paramount and a group of state attorneys general (AGs) over the costs associated with delaying the merger between Paramount and Warner Bros. Discovery (WBD). The dispute centers around the proposed $110 billion deal, which would combine two storied film studios and create a massive portfolio of pay TV networks and streaming platforms.

The state AGs, led by California’s Rob Bonta, filed an antitrust lawsuit in July to challenge the merger, citing concerns that it would violate the Clayton Antitrust Act. This law prohibits anticompetitive mergers and acquisitions, and the state AGs argue that the proposed deal would harm consumers and stifle competition in the media industry.

Paramount, however, is pushing back against the state AGs, arguing that they are responsible for the costs associated with delaying the merger. In a recent filing, Paramount requested a $1.88 billion bond, which would be posted by the states behind the lawsuit. This amount is based on Paramount’s calculation of ticking fees and other costs it will have to pay due to the holdup.

The proposed deal would combine two of the biggest names in the media industry, creating a massive entertainment powerhouse with a vast portfolio of assets. However, the delay has already caused significant financial losses for Paramount, which has agreed to pay Warner Bros. shareholders an additional 25 cents per share, per quarter, until the deal closes. This ticking fee could add up to roughly $650 million in cash value per quarter.

Paramount’s statement emphasizes the financial burden of the delay, pointing out that the company will have paid Warner Bros. shareholders an unrecoverable $1.3 billion in ticking fees alone by the time the trial concludes. The company argues that this loss would be even greater if the delay continues, and that the state AGs are responsible for providing security to cover these costs.

However, the state AGs are pushing back against Paramount’s claims, arguing that the company is responsible for the costs associated with the delay. In a statement, Bonta’s office pointed out that Paramount and Warner Bros. are two sophisticated companies that willfully chose to include a costly ticking fee in their merger contract. The office also noted that Paramount stipulated to the timing of the deal and did not request a bond as a condition of agreeing not to close until after the trial.

The dispute between Paramount and the state AGs is set to go to trial in March, with significant financial implications for both parties. The case highlights the complex and often contentious nature of antitrust litigation, and the need for companies to carefully consider the potential risks and costs associated with large-scale mergers.