Paramount is continuing to press a dozen states led by California and the Writers Guild of America to bear the costs of the hold up caused by their lawsuits challenging the $111 billion megamerger.
The studio has asked for a $1.88 billion bond to cover losses if it wins the cases. In July, U.S. District Judge Araceli Martínez-Olguín temporarily halted the deal and scheduled a trial for March, months past its target closing date of late September.
There will be major financial repercussions for the delay. Under the agreement, Warners shareholders are owed roughly $650 million per quarter or $6.9 million per day if the merger hasn’t closed by Oct. 1. The bond represents the maximum payout to investors, plus legal fees.
The states and WGA have pushed back on the demand, arguing that Paramount proposed the fee in a bid to win support from shareholders, who were weighing a rival bid from Netflix at the time. The studio “now wishes to offload that responsibility,” stated a filing from California Attorney General Rob Bonta last month.
In a brief filed on Tuesday, Paramount says that the states are obligated to post the bond under antitrust laws and federal procedures governing injunctions. It claims the delay is a “serious injury at a time when studios are already being squeezed out by streaming megaliths like Netflix and Amazon and other big tech companies who have entered the competition.”
Across the litigation, Paramount has emphasized hefty losses associated with the court holding up the merger, pointing to missed opportunities to ramp-up investment in production and rising financing costs.
“Paramount simply asks that Plaintiffs honor what the Clayton Act requires: A bond that will compensate Paramount for the damage it will suffer if the injunction proves improvidently granted, i.e., if Paramount ultimately prevails in the litigation and was therefore wrongly prevented from consummating the merger now, as it is prepared to do,” writes Danielle Sassoon, a lawyer for the studio, in the filing.
A legal sticking point in the back-and-forth over the bond: The states have argued that the court never issued an injunction, which would render Paramount ineligible for a bond, since the studio voluntarily agreed not to close the deal under a joint stipulation. Paramount pushes back on the framing, calling the argument disingenuous.
Historically, courts have side-eyed issuing massive bonds in merger cases, particularly when the government challenges the deal. The judge overseeing the Nexstar-Tegna merger, for example, issued one for $10,000 after the TV giant asked for $150 million.
Regulators across 69 countries have cleared the merger. The lawsuits from the states and WGA are the only barriers keeping the company from closing.
“But for these lawsuits, the transaction is now otherwise ready to close, and the resulting costs of delay are substantial and quantifiable,” said a Paramount spokesperson.
“If plaintiffs insist that this transaction is paused during the pendency of their lawsuit, they must accept the financial consequences if their challenge ultimately fails,” the spokesperson added. “Paramount agreed to delay closing to facilitate a prompt resolution of the case, while expressly preserving its legal rights and we continue to honor that agreement.”
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