States, Writers Guild Urge Judge to Reject Paramount’s $1.9 Billion Bond Demand

The opposition puts the focus back on the mounting cost of delaying one of Hollywood’s largest proposed combinations. In a court filing, the states and the WGA argued that Paramount voluntarily accepted the financial obligations it now wants its legal challengers to cover, according to the source report provided from IMDb and reporting published Tuesday.

Paramount has asked US District Judge Araceli Martinez-Olguin to require the plaintiffs to post a $1.88 billion bond that could compensate the company for losses if it ultimately defeats their antitrust challenges.

The states countered that Paramount shouldn’t be allowed to transfer the financial consequences of agreements it entered into willingly.

“Paramount now wishes to offload its responsibility,” California Attorney General Rob Bonta said in the court filing, according to Reuters.

At issue are escalating “ticking fees” built into Paramount’s agreement to acquire Warner Bros. Discovery. Beginning Oct. 1, Paramount is due to pay 25 cents a share for each quarter the transaction remains unfinished, equivalent to about $650 million a quarter or $7 million a day, according to the IMDb source report.

Those costs could climb above $1 billion by the time the antitrust case reaches trial in March. Paramount has estimated that the fees could result in about $1.3 billion of unrecoverable losses by the time the trial concludes and final briefs are filed in April, according to The Wrap.

The states argued that those expenses are effectively self-imposed. Paramount agreed to the ticking-fee provision and later consented to refrain from completing the merger until the antitrust litigation is resolved or June 1, 2027, whichever comes first, according to the filing.

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Related: Iowa, Montana Ask Supreme Court to Halt Paramount Merger Challenge

The plaintiffs also contend that no bond is necessary because Martinez-Olguin previously found that the states brought their case to enforce significant public interests when she issued a temporary restraining order. They argue Paramount hasn’t demonstrated a change in circumstances sufficient to justify altering that position, according to the IMDb report.

Paramount, meanwhile, says the plaintiffs shouldn’t be insulated from the financial consequences of delaying the transaction if their antitrust challenge ultimately fails.

The company said the states “should not get a free pass” from posting security against potential losses and argued that the plaintiffs can’t simultaneously seek to prevent the merger from closing while accepting no responsibility for the resulting costs if they lose the case, according to Reuters.

The legal challenge remains a significant obstacle for Paramount Chief Executive Officer David Ellison’s effort to combine the two entertainment companies. Paramount says regulators representing at least 68 countries have approved or declined to challenge the transaction, leaving the lawsuits as the remaining hurdle to completion.

The financial stakes rise considerably if the dispute drags on. Paramount could owe Warner Bros. Discovery a $7 billion termination fee if regulatory issues ultimately prevent the deal from closing, while the merger agreement has an outside completion date in June 2027, according to the source report.

The latest filing leaves Martinez-Olguin to decide whether the states and writers must provide financial security while pursuing their effort to stop the transaction — a ruling that could affect not only the economics of the litigation but also the pressure on both sides as the March trial approaches.

Source: The Wrap