The Attorney General Of California Vs. Paramount (Part 2)

The $7 Million-a-Day Clock

Under the merger agreement between Paramount and Warner Bros. Discovery, every day after September 30 that the transaction has not closed increases the cash consideration payable to WBD shareholders. Paramount describes the contractual mechanism as “Ticking Consideration” or a ticking fee. At current share counts, the economic cost is roughly $7 million a day, or approximately $650 million for every 90 days of delay.

The ticking fee may now be the most consequential provision Paramount Skydance agreed to in order to wrest WBD away from Netflix. At the same time, the inclusion of the ticking fee was a key factor that ultimately persuaded the Warner Bros. Discovery Board of Directors to accept Paramount’s offer of $31 per share in cash.

Technically, it is not a penalty payable separately to WBD, nor is it the $7 billion regulatory termination fee that would become relevant if the transaction ultimately fails for specified regulatory reasons.

Instead, it increases the merger consideration paid directly to WBD shareholders if the deal eventually closes.

The merger proxy defines the amount precisely: beginning after September 30, each WBD share earns an additional $0.00277778 for every calendar day until closing, capped at $0.25 for each 90-calendar-day period.

That works out to approximately $7 million of additional purchase consideration per day based on the outstanding share count—or roughly $650 million every 90 days.

If the litigation proceeds through the March trial, Paramount has estimated that the ticking consideration could cost approximately $1.3 billion. Delays into June could add still more expense, alongside financing costs. Paramount’s August request for a $1.88 billion bond from the States and the Writers Guild of America (WGA) was designed to cover those asserted losses if the challengers ultimately lose.

There is an important qualification: if the merger agreement is terminated rather than completed, no ticking consideration is payable. The ticking mechanism therefore increases the price of a successful but delayed acquisition; it is not automatically a cash payment Paramount owes simply because October 1 arrives.

But economically, the incentive is unmistakable.

Every week after September 30, 2026, adds roughly $49 million to the acquisition price. Every month adds roughly $210 million. A six-month delay approaches $1.3 billion.

That makes settlement before October enormously valuable to Paramount.

It also creates a peculiar bargaining problem. The ticking fee gives Ellison a powerful reason to settle—but Bonta knows that. As September 30 approaches, California’s negotiating leverage arguably increases rather than decreases.

The Settlement That Wasn’t

For a period in August, compromise appeared possible.

California Governor Gavin Newsom and others encouraged negotiations. Bonta publicly indicated that he was willing to talk, while making clear that voluntary promises about future behavior would not necessarily satisfy the States.

Paramount has offered commitments intended to demonstrate that the combined company would increase rather than suppress output. Ellison has pledged, among other things, that Paramount and Warner Bros. would collectively release at least 30 theatrical films annually.

Bonta has been skeptical.

Reporting by The Wall Street Journal and Reuters indicated that California was considering substantially more intrusive remedies, potentially including divestitures of cable channels and requirements designed to preserve independence between the Paramount and Warner Bros. film operations.

There is even talk that CNN sits at the heart of the dispute between Ellison and Bonta; with some observers speculating that California’s efforts are geared towards getting Paramount to agree to divest CNN as part of any settlement – lest CNN “suffer the same fate” as CBS News, the venerable news outlet that has been mired in controversy and internal strife ever since Skydance acquired Paramount Global in August 2025.

Then the settlement talks imploded.

Bonta canceled a meeting scheduled for August 24, 2026, after accusing Paramount of leaking and mischaracterizing confidential discussions from an earlier meeting. Paramount denied being the source of the leak and said it remained prepared to negotiate.

On August 25, 2026, Bonta said no further settlement talks were scheduled. He nevertheless left the door open, saying in substance that discussions could resume if Paramount approached them sincerely and in good faith.

The gap is therefore both substantive and personal.

Paramount appears to favor commitments designed to guarantee output and continued investment. California has signaled that behavioral promises may not cure what it views as the structural elimination of a competitor. If Bonta insists upon asset divestitures or meaningful separation of the studios, the settlement price could begin to undermine the strategic rationale for which Ellison is paying $110 billion.

Iowa and Montana Go to the Supreme Court

On August 25, 2026, perhaps the strangest development in an already unprecedented affair took place. On that date, Iowa Attorney General Brenna Bird and Montana Attorney General Austin Knudsen asked the Supreme Court for leave to file a Bill of Complaint against California and the other 11 plaintiff States.

Their theory is remarkable and somewhat bizarre.

Iowa and Montana contend that they too possess sovereign and quasi-sovereign interests in the economic consequences of the merger. In their telling, California and its allies are using federal antitrust litigation to impose their preferred national economic policy on citizens of states that believe the merger is lawful and beneficial.

They ask the Supreme Court to declare that the merger does not violate the Clayton Act and prevent the defendant States from continuing their Northern California litigation.

The procedural vehicle is the Supreme Court’s original jurisdiction over controversies between States. That jurisdiction is most famously associated with disputes over borders, water rights and competing sovereign claims—not disagreements between attorneys general about whether a private merger violates federal antitrust law.

That makes the Iowa-Montana effort a long shot.

The Supreme Court has substantial discretion over whether to entertain original actions, and Iowa and Montana face an obvious conceptual problem: California has not itself prohibited the merger by legislative fiat. It filed a lawsuit under a federal statute, and a federal judge—not Bonta—issued the initial restraint and is adjudicating the Clayton Act claim.

Iowa and Montana could potentially seek to express their position through intervention or amicus participation in that litigation. Their argument is that doing so would not vindicate their sovereign interest because the injury, as they characterize it, is another state’s assertion of authority to decide a question affecting the nation as a whole.

Whether the justices will accept that framing is uncertain. What is clear is that merger enforcement itself has become polarized enough that one group of States is now asking the Supreme Court to restrain another group of States from enforcing federal antitrust law.

In the third and final installment of this series, we analyze the potential impact of David Ellison’s threat to move Paramount out of California if he cannot reach a settlement with Rob Bonta.