ISLAMABAD – Paramount has asked a US court to require a group of states and the Writers Guild of America (WGA) to post a $1.88 billion bond to cover losses linked to delays in its proposed $111 billion merger.
The company is seeking the bond as lawsuits continue to challenge the transaction. California is leading the legal action, which also involves several other states and the WGA.
In July, US District Judge Araceli Martínez-Olguín temporarily halted the merger and scheduled a trial for March. The timetable pushes the case well beyond Paramount’s original target of completing the deal by late September.
The delay could have significant financial consequences for the companies involved.
Under the merger agreement, Warner shareholders are entitled to about $650 million per quarter, or roughly $6.9 million per day, if the transaction has not closed by Oct 1.
Paramount says the proposed $1.88 billion bond would cover the maximum potential payments to investors as well as legal costs.
States oppose Paramount’s demand
The states and the WGA have opposed Paramount’s request.
California Attorney General Rob Bonta said in a filing last month that Paramount had offered the payment as part of efforts to gain shareholder support while Netflix was considering a competing bid.
The state now argues that Paramount is attempting to shift that financial responsibility to the plaintiffs.
Paramount rejected that position in a brief filed on Tuesday.
The company argues that federal antitrust law and rules governing court injunctions require the plaintiffs to provide a bond when a deal is blocked.
Paramount said the delay was causing serious financial harm at a time when traditional studios were already facing pressure from streaming companies such as Netflix and Amazon, as well as other technology firms entering the entertainment market.
Company points to rising costs
Throughout the legal battle, Paramount has highlighted the financial impact of the delay.
The company has pointed to missed opportunities to increase investment in production and higher financing costs while the merger remains on hold.
Paramount lawyer Danielle Sassoon said the company was seeking compensation if the court ultimately rules in its favour.
The legal dispute also centres on whether the court actually issued an injunction against the merger.
The states argue that no injunction was issued because Paramount voluntarily agreed not to complete the transaction under a joint stipulation.
Paramount has rejected that interpretation and described the argument as disingenuous.
Courts cautious over large merger bonds
Large bonds have historically faced scrutiny in merger cases, particularly when government agencies challenge a transaction.
In one recent case involving the proposed Nexstar-Tegna merger, a judge ordered a $10,000 bond after the television company had sought $150 million.
The example could become relevant as the court considers Paramount’s much larger request.
Regulators in 69 countries have already cleared the Paramount merger, according to the company. The lawsuits filed by the states and the WGA remain the main obstacles to completing the transaction.
A Paramount spokesperson said the merger would otherwise be ready to close.
The company argued that the financial consequences of the delay were substantial and could be calculated.
Paramount also said it had agreed to postpone the closing to allow the court case to be resolved quickly while retaining its legal rights.
The company maintained that if the plaintiffs ultimately lose their challenge, they should bear the financial consequences of having prevented the merger from closing.
Key points:
- Paramount has asked a US court to require states and the Writers Guild of America to post a $1.88 billion bond over delays to its proposed merger.
- The $111 billion merger has been challenged by California and other states, along with the Writers Guild of America.
- A court has temporarily halted the deal and scheduled a trial for March, months after Paramount’s original target for completion.
- Warner shareholders could receive about $650 million per quarter if the merger remains incomplete after Oct 1.
- Paramount says the lawsuits are causing substantial financial losses and higher financing costs.
- The states argue that Paramount is trying to shift responsibility for costs it previously accepted to secure shareholder support.
