Paramount seeks $1.88 billion guarantee from states in Warner Bros. Discovery deal

Paramount is seeking a significant financial guarantee from 12 U.S. states that are attempting to halt its acquisition of Warner Bros. Discovery. The film company has requested a judge to compel these states to provide a $1.88 billion bond, equivalent to over 12 billion Danish kroner. This guarantee is intended to cover the substantial costs Paramount could incur if the $110 billion deal faces delays.

The urgency stems from daily fees Paramount must pay if the acquisition isn't finalized by September 30. The company estimates these "delay fees" will amount to $1.3 billion by the time the states' lawsuit is heard in March and written submissions are filed in April. By June, these fees could reach $1.7 billion, with an additional $190 million if the merger is postponed until June 2027. Paramount had agreed to these fees as part of the original acquisition terms.

The states' legal challenge, filed on July 13, argues that combining Paramount and Warner Bros. Discovery would create a media giant with excessive market power, potentially leading to increased prices for consumers. The U.S. Department of Justice's approval for the deal is set to expire on February 19. Paramount's request for the states to post a guarantee aims to ensure financial protection should a court ultimately approve the merger, allowing the company to recoup its potential losses from the ongoing legal battle.

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Paramount and Warner Bros. are two experienced companies that have quite deliberately decided to include an expensive delay fee as a provision in their merger agreement.