Paramount-WBD Merger Faces Fresh Setback: California AG Reportedly Scraps Meeting Over 'Bad Faith' Conduct

• Bonta reportedly accused Paramount of leaking and misrepresenting details from preliminary settlement discussions.
• California is seeking structural remedies that could require Paramount to divest assets before approving the deal.
• Paramount could face hundreds of millions of dollars in additional costs if the transaction does not close by October.

California Attorney General Rob Bonta reportedly canceled a scheduled Monday meeting with Paramount (PSKY) representatives to explore a settlement in the state's lawsuit to block Paramount's proposed acquisition of Warner Bros. Discovery (WBD), accusing the company of negotiating in “bad faith.” 

According to a New York Times report, Bonta called off the meeting late Sunday after accusing Paramount of leaking details from a preliminary discussion between the two sides on Friday and mischaracterizing what was discussed.

"Not only did Paramount leak the alleged substance of settlement discussions, but they misrepresented these discussions, demonstrating a lack of good faith," Bonta said in a statement. "As soon as Paramount stops playing games and engages sincerely, my office is happy to meet again." A Paramount spokeswoman had no immediate comment.

PSKY stock rose nearly 1% in pre-market trade, while WBD shares gained 1.4%, with both stocks among the top trending on Stocktwits. Retail sentiment around WBD and PSKY trended in ‘bullish’ territory over the past day.

The Deal At Stake

Paramount's proposed acquisition of Warner Bros. Discovery is valued at $111 billion and would combine two major film studios, multiple streaming platforms, and news outlets CNN and CBS News into a single media giant. 

Last month, California led a coalition of 12 state attorneys general in suing to block the transaction, arguing it would concentrate excessive market power in cable television and film production.

California Wants Structural Remedies

Bonta has previously said he would only accept structural remedies to resolve the case, meaning the companies would likely need to divest parts of the combined business rather than agree to behavioral commitments. 

The collapse of Monday’s settlement meeting therefore leaves the two sides with less time to find common ground before the case moves toward trial. The California case is scheduled to go to trial in March. If the litigation continues, the deal could face a prolonged period of uncertainty.

If the transaction does not close by October, Paramount would begin paying fees to Warner Bros. Discovery shareholders under the terms of the agreement. Those payments could reach hundreds of millions of dollars if the litigation continues for an extended period.

Read also: Michael Burry Says LULU Stock Is ‘Screaming Cheap’ While Apple Shares Are ‘Permacostly’ Like Costco

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