Paramount clears court hurdle for $110 billion Warner Bros deal, hands integration to cost-cutter Ynon Kreiz

A federal judge on Wednesday cleared Paramount to close its $110 billion acquisition of Warner Bros. Hours later, Paramount named the executive who will run the integration: Ynon Kreiz, who as chief executive of Mattel executed more than $1.5 billion in savings through thousands of job cuts and a simpler manufacturing strategy, according to Reuters. He inherits a target of more than $6 billion in savings and a settlement that rules out several of the easiest ways to reach it.

US District Court Judge Araceli Martínez-Olguín approved a Sept. 21 settlement with a California-led group of 12 states that had sued to block the merger, Reuters reported. She called it a "reasonable factual and legal resolution" and rejected objectors' arguments that it should go further. The companies said the deal is expected to close on October 6. The combined company will be named simply Skydance, CNBC reported.

Kreiz starts at Paramount on October 5 and becomes co-CEO at closing, joining the board, according to the company's announcement. David Ellison remains chairman and CEO and will focus on strategy, creative direction, talent relationships, technology and capital allocation. Kreiz takes day-to-day management and integration. The combined company's businesses will report jointly to both men. Morningstar analyst Matthew Dolgin put it more plainly in a research note: "Though his title is co-CEO, we view Kreiz as a chief operating officer."

Paramount's release puts the savings at more than $6 billion in run-rate synergies. Paramount intends to realize them within three years of closing, while carrying around $79 billion in debt, CNBC reported. Paramount executives have said most of the savings will come from nonlabor costs.

The settlement narrows the field. The combined company must release at least 30 films a year in US theaters for five years and spend an extra $300 million a year on US production, Reuters reported. Falling short of the film quota could force a sale of Miramax. According to CNBC, the quota rises to 32 films a year in 2029 through 2031. Paramount also agreed to keep both its own lot and the Warner Bros. lot, Business Insider reported. Those commitments, together with honoring existing union agreements, "shut off easy paths to synergies," Reuters reported.

The consent decree requires the company to honor collective bargaining agreements and commit $47.5 million over five years to a workforce fund for training and career development for laid-off employees, Variety reported. A separate settlement with the Writers Guild of America requires $17.5 million for the guild's health fund and maintaining WGA staffing levels at CBS News for five years, according to Reuters. A California Department of Justice spokesperson said the settlement "centers the needs, concerns, and futures of California workers".

With studios, production volume and union contracts protected, the duplication sits elsewhere. The combined company will have two sets of software engineers, marketing teams and ad sales groups, Business Insider reported. It added that Warner Bros. Discovery's board had warned job cuts were coming "given the overlapping nature" of the companies' studios, streaming platforms and TV networks. Paramount has spent the past year moving Paramount+ and Pluto TV onto a shared tech platform, and Ellison has said HBO Max will eventually be integrated as well. Television overlap is large too: Warner Bros. TV produces around 80 series and CBS Studios around 60, Variety reported. HBO chief Casey Bloys is poised to oversee the combined streaming business after Paramount+ head Cindy Holland said she was stepping down, according to Variety.

Kreiz has done this kind of work before. At Mattel he restructured the supply chain, closed several manufacturing facilities and cut the workforce by 2,200, CNBC reported. During his three years at Endemol, his reorganization reduced costs by 20%, Reuters reported, citing the Financial Times, though revenue and profits kept falling.

Inside both companies, staff are preparing for cuts. Insiders expect multiple rounds of layoffs over the next few months, Variety reported, and one executive told the publication: "There will be a race to get this done in the fourth quarter." Five of eight employees Business Insider interviewed said they were nervous about their jobs. Ellison told staff in a memo that the company is still working out integration logistics: "We don't have all the answers yet, and I won't pretend otherwise."

A Los Angeles County Department of Economic Opportunity report found that 4,500 film and TV jobs in the county are at risk over three years as the companies combine operations, CNBC reported. Needham analyst Laura Martin estimated the full integration could take two to three years, and wrote: "Over time, we expect cost synergies to be higher than the $6 billion promised."