DOJ Urges States Post $1.9B Merger Bond
DOJ Urges States Post $1.9B Merger Bond
Anonymous
Key Points
1
Paramount initially agreed in July to keep the transaction on hold through trial, after the judge issued a 28-day temporary restraining order; the company later changed course and sought either a bond or permission to close the merger.
2
The states’ lawsuit argues that the merger would reduce competition in theatrical distribution and basic cable markets, forming the basis for the coalition’s challenge.
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Warner Bros. Discovery shareholders are owed about $650 million per quarter—or approximately $6.9 million per day—if the merger has not closed by Oct. 1; the proposed bond would cover the maximum investor payout along with legal fees.
4
California Attorney General Rob Bonta said Paramount had proposed the delay-related fee to secure shareholder support while shareholders were considering a rival Netflix bid, and accused the studio of now trying to shift that responsibility to the states.
5
The Justice Department approved the merger in June and issued an unusually lengthy explanation for its support, putting it at odds with the 12-state coalition’s subsequent antitrust challenge.
The Justice Department is backing Paramount's demand that 12 states post a $1.9 billion bond before continuing their lawsuit to block the studio's merger with Warner Bros. Discovery. DOJ argues the states are acting as private enforcers of federal antitrust law and must provide financial security to cover potential damages from the deal delay.
Paramount says the merger freeze could cost at least $1.88 billion in fees and shareholder payouts. The states and the Writers Guild of America oppose the bond requirement, arguing courts typically waive such demands when states sue to protect the public interest.
Paramount's $1.88 Billion Damage Claim
Paramount claims the merger delay costs the company real money. Reuters reports that Warner Bros. Discovery shareholders are owed roughly $6.9 million per day if the deal doesn't close by October 1. The proposed bond would cover maximum investor payouts plus legal fees from keeping the merger frozen.
The studio initially accepted a delay in July after a judge issued a temporary restraining order. But Paramount later changed course, pushing for either a bond or permission to close the deal immediately.
States Argue Paramount Chose This Risk
California Attorney General Rob Bonta accused Paramount of trying to shift costs it already accepted. CalAG said the studio proposed the delay-related fee to secure shareholder support while shareholders considered a rival Netflix bid.
The 12-state coalition argues courts commonly waive bond requirements in cases where states protect the public interest. Forcing states to post $1.9 billion would essentially let Paramount make the states pay for a merger freeze they created.
DOJ Approval Sets Up Rare Split
The Justice Department approved the merger in June and issued an unusually long explanation for its support. This put the federal government at odds with the 12-state coalition's antitrust challenge.
The states' lawsuit argues the merger would cut competition in theatrical distribution and basic cable markets. A trial is scheduled for March, with the merger remaining blocked until then.
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