California, 11 States Urge Court to Reject Paramount’s $1.88bn Bond Request Over Warner Bros...

California and 11 other states have urged a federal judge to reject Paramount Skydance's request for a $1.88 billion bond to offset the financial costs of delaying its proposed $110 billion acquisition of Warner Bros Discovery, escalating a legal battle that could determine the fate of one of Hollywood's biggest deals.

In a court filing on Monday, California argued that any financial losses Paramount faces from the delay are largely of its own making, saying the company should not be allowed to shift those costs onto the states and the Writers Guild of America, which is also challenging the transaction.

The dispute centers on the consequences of the states' antitrust lawsuit, filed on July 13 to block the merger. Paramount has asked the court to require the plaintiffs to post a $1.88 billion bond to compensate the company for losses if the deal is ultimately allowed to proceed after the litigation.

California Attorney General Rob Bonta said Paramount voluntarily accepted the financial risks associated with the transaction.

"Paramount now wishes to offload its responsibility," Bonta said in the filing.

Paramount agreed to pay Warner Bros shareholders a so-called ticking fee of $7 million a day if the transaction remains incomplete after September 30. The payment begins October 1 and was part of the terms Paramount offered to persuade Warner Bros to abandon its earlier agreement with Netflix.

The states also pointed to Paramount's decision to voluntarily refrain from completing the merger while the antitrust case is pending, or until June 1, 2027, whichever comes first.

Paramount has warned that the litigation could impose a substantial financial burden. The company estimates that by the time the trial concludes in March and final legal briefs are submitted in April, it could have paid roughly $1.3 billion in ticking fees to Warner Bros shareholders, money it says would not be recoverable.

The company argues that the states should bear some financial responsibility if their challenge ultimately fails.

"The states should not get a free pass," Paramount said in a statement, arguing that plaintiffs should be required to post a bond to cover damages arising from the delay.

"Plaintiffs cannot have it both ways," the company said, arguing that the states cannot seek to prevent the transaction from closing while avoiding responsibility for the costs of delaying it.

At the heart of the broader lawsuit is the competitive impact of combining Paramount and Warner Bros Discovery, which owns major film and television assets as well as streaming businesses. California and the other states argue that the merger would create a media giant with greater leverage over consumers and the ability to raise prices for film and television content.

The Writers Guild of America has separately sued to block the transaction, adding opposition from Hollywood's creative workforce to the government's antitrust challenge.

The case represents a major obstacle to Paramount CEO David Ellison's strategy of transforming the company into a larger competitor to Netflix and Disney. A successful combination would bring together Paramount's film and television operations with Warner Bros' extensive entertainment portfolio, potentially reshaping the competitive landscape of the U.S. media industry.

Paramount maintains that the transaction has already cleared the principal regulatory hurdles outside the United States. The company said regulators in at least 68 countries have either approved the merger or declined to challenge it, leaving the U.S. litigation as the principal obstacle to closing.

Paramount has described the states' lawsuit as "meritless" and said it remains confident the deal can be completed.

The bond dispute adds another layer of financial pressure to a transaction already facing a lengthy legal timetable. The court must now weigh whether the potential costs of delaying the merger should be protected through a bond while also determining whether the states' antitrust case has sufficient grounds to prevent Paramount from completing the acquisition.

But the outcome could have consequences beyond the $1.88 billion bond request. If the court allows the deal to remain on hold through the litigation, Paramount faces mounting ticking fees and uncertainty over the transaction. If the court rejects the states' challenge, the plaintiffs could face pressure to justify why Paramount should absorb billions of dollars in costs generated by a lawsuit that ultimately fails.