La Paramount's takeover of Warner Bros. Discovery is enriched with a new chapter. Now for David Ellison risks turning into a long and very costly war of attrition. major acquisition from about 110 billion dollars is frozen by the antitrust battle launched by California along with eleven other American states and Paramount is preparing a countermove destined to shake up Hollywood: move a significant portion of its operations out of California.
The plan, already approved by the board of directors according to the American press, could begin as early as this fall and develop over the course of five years. Tennessee and Texas are among the destinations being considered, while Georgia also appears in the background. Ellison continues to maintain that he prefers to remain in California, but the message sent to the state authorities is increasingly clear. Paramount's legal representative also publicly confirmed for the first time that the possibility is real, Makan Delrahim. When asked about the possibility of leaving the state he explained that there comes a time when administrators have to consider their “fiduciary duty towards shareholders”. And as time passes, the merger bill continues to mount.
California lawsuit freezes Warner's mega-settlement
The main obstacle in Ellison's path became the California Attorney General. Rob Bonta, who together with the attorneys general of eleven other states has sued to prevent the operationAccording to the states, the merger between Paramount and Warner Bros. Discovery would create a media giant with enough power to reduce competition and raise prices in film and television. Paramount rejects this interpretation and argues that the entertainment market has already been profoundly changed by the growth of Netflix and the big tech groupsEllison considers increasing size to be one of the tools necessary to compete with rivals with much greater financial resources than traditional studios.
The company had initially opted for a fast-track regulatory process. The green light came in June. U.S. Department of Justice, while dozens of foreign authorities have authorized the operation. The United Kingdom also recently gave its approval, accompanying it with five-year commitments on programming and editorial independence.
The lawsuit by the American states, however, completely changed the calendar. Paramount agreed to do not complete the acquisition while the legal proceedings are ongoing, until the court's decision or, at the latest, next summer. The federal judge Araceli Martínez-Olguín He also set the start of the trial at March 2, 2027, rejecting the group's request to arrive in the chamber as early as November. A postponement that Delrahim defined "devastating", arguing that the uncertainty is weighing on employees of the two companies and the entire industry.
Ellison's Plan to Take Paramount Out of Hollywood
It is in this scenario that the most sensational move takes shape. According to American media reports, Paramount's board has greenlit a plan to relocate out of California, illustrated by Ellison to the company's management team. The first phase could start as early as 1 ° October and concern some central functions. The project, however, would be much broader and could develop over the course of five years, relocating a significant portion of the jobs related to film and television activities elsewhere. Among the alternatives being considered are, in particular: Tennessee and Texas, two states that in recent years have tried to attract companies with a combination of incentives, more favorable taxes and lower costs. Georgia too it would be among the possibilities being evaluated.
The operation would also have a strong real estate componentParamount may consider selling the historic Hollywood lot, about 65 acres along Melrose Avenue. If the merger with Warner goes through, the large Warner Bros. complex in BurbankPotential divestments would provide new resources to cover the costs of the acquisition. However, actually relocating a film studio is much more complicated than relocating a technology company. Paramount depends on an ecosystem built over decades around Los Angeles, including producers, directors, screenwriters, actors, technicians, and dozens of soundstages that are difficult to replicate in the short term.
The strategy, however, recalls that adopted by Oracle infrastructures , the software giant co-founded by David's father, Larry Ellison. After decades in California, Oracle moved its headquarters to Texas in 2020 and subsequently designated Nashville as its new headquarters.
Rob Bonta doesn't seem impressed by the prospect. The Attorney General has called the plan “another attempt to blackmail the state into allowing an illegal agreement to pass“, assuring that his office will continue to counter what he considers an excessive concentration.
Warner Bros. Acquisition: Every Day of Delay Costs $7 Million
The real pressure on Paramount, however, comes from financial calendarTo beat Netflix in the race for Warner Bros. Discovery, Ellison had crafted an offer that relied heavily on certainty and speed of closing. Now that very structure risks becoming one of the most costly issues in the deal.
From 1 ° October, if the acquisition is not yet concluded, the so-called ticking fees, an increase destined for Warner shareholders equal to approximately $7 million for each day of delay, equivalent to approx $650 million per quarter.
This isn't a fine paid day by day, but an increase in the consideration that will be paid to shareholders if the deal ultimately closes. If the dispute were to drag on, the bill could reach several billion. Estimates cited by the American press range up to approximately 2,1 billion dollars, to which Paramount expects to have to add approximately 190 million in additional costs for the bridge financing.
The greatest risk remains the failure of the entire operation. If the deal fails to close within the expected timeframe and under the conditions established by the contract, Paramount could find itself facing a $7 billion termination feeThe company, however, remains confident. Ellison assured that the financing is ready and that nothing is at risk, while Paramount maintains it can win the legal battle or reach a compromise with the states first.
From the possible sale of Cnn to political pressure on California
The key word is now negotiationBonta has not closed the door to the possibility of an agreement, but is asking for more incisive measures than simple promises regarding the future management of the group. Paramount, for example, has committed to distributing at least 30 films in theaters a year, an offer that the States consider insufficient and difficult to enforce.
Delrahim responded by making clear how much room there is for maneuver: “Everything is on the table”, explained the group's legal representative. And among the possibilities for reaching an agreement with California, a sale of CNN, one of Warner Bros. Discovery's most politically sensitive properties.
The offensive is thus taking place simultaneously on the judicial, industrial, and political fronts. Paramount has sought the support of major movie theater chains by promising a robust production schedule, while the potential relocation outside California increases pressure on state institutions in a state already grappling with job losses in the film industry.
The company's move, in any case, it would not cause the antitrust case to lapseThis is why several American observers interpret the prospect of leaving Hollywood as a negotiating tool. A former prosecutor quoted by the American press called the latest moves a veritable public relations campaign, underlining how Paramount has lost some of its leverage after the decision to set the trial only for March. Ellison also continues to say he wants to stay in California. But distance between the parts it has become such that Paramount is preparing a concrete alternative.
For the manager, the paradox is evident. After having managed to beat Netflix and convince Warner Bros. Discovery to accept his offer, The hardest part is no longer conquering Warner, but actually managing to buy itAnd starting October 1st, time will no longer be just a legal issue: each new day of waiting will also have a price.
