Updated: Warner Bros. and Paramount shares rise as reports suggest California settlement talks may remove merger obstacles

Updated the first key point, added chart

Reuters, September 21 - On Monday, shares of Warner Bros. Discovery and Paramount Skydance surged after reports that Paramount and the California Attorney General are in advanced settlement talks, which could remove one of the final barriers to the $110 billion merger between the two companies (link).

Here are more details:

• Warner Bros. WBD.O rose 7.1% in early trading, and Paramount PSKY.O gained 5.3%; if the rally holds, the combined market value of the two companies will increase by $5.59 billion.

• The Wall Street Journal reported on Sunday that the two parties have discussed a series of concession terms (link), including investing $1.5 billion in film and television production in California, a commitment not to sell the studios’ lots, and potential penalties for Paramount if it fails to produce 30 movies annually after the merger.

• According to The Wall Street Journal, other measures under consideration include selling some cable TV channels and establishing a committee to ensure CNN's editorial independence.

• A lawsuit filed by California and 11 other states (link) is one of the last obstacles Paramount CEO David Ellison faces in merging two major Hollywood studios to create an industry giant that can compete with Netflix NFLX.O and Disney DIS.N.

• Reaching a settlement will also help Paramount avoid paying Warner Bros. shareholders a daily $7 million penalty (link) if the transaction is not completed by September 30.

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