By Jody Godoy
Feb 27 (Reuters) - California has a lot to lose if Paramount Skydance buys Warner Bros Discovery and could stand in the way of a deal, while Paramount's deep political connections to the Trump administration are expected to smooth the path to federal regulatory approval.
State Attorney General Rob Bonta said on Thursday that California is already investigating the deal and will be "vigorous" in its review. Hours earlier, Paramount beat out streaming giant Netflix in a months-long battle
for control of the storied Hollywood studio.
Paramount's bid is likely to raise concerns about job cuts in California that also dogged Netflix's bid. Paramount sees $6 billion in cost "synergies" in the deal, which is often code for massive layoffs and cutting, or sharply paring back, entire units. It can also mean reducing the number of suppliers and squeezing existing contractors for better terms after the two companies merge. None of that is good news for the California economy.
While Paramount initially came in with what the Warner Bros board viewed as an inferior offer, it was highly successful in stirring up political opposition to Netflix's bid among Republicans in Washington. Now, Bonta and California Governor Gavin Newsom, both Democrats, are likely to be the biggest hurdles to Paramount after the media conglomerate won the fight by upping its offer price.
State intervention to block the deal is "very likely," TD Cowen analysts said in a note on Thursday, adding that "approval from federal regulators seems likely given the political environment."
Spokespeople for Warner Bros and Paramount did not immediately respond to requests for comment.
Newsom, a potential 2028 presidential candidate, has gone out of his way to present himself as a leader among the political opposition to Trump. Bonta has sued the federal government repeatedly over Trump administration decisions on issues such as clean energy, pipeline projects and health funding.
U.S. Senator Adam Schiff, a California Democrat, said on Thursday that "what was true for Netflix is still true now for Paramount," calling for the deal to face "the highest levels of scrutiny."
California has challenged large mergers in the past. In 2019, it led a group of states challenging T-Mobile's acquisition of Sprint. While the states lost in court, California secured a settlement recouping its costs and getting temporary commitments to keep jobs in place and offer low-cost plans for consumers.
California also joined the Federal Trade Commission and several other states in a successful bid to block Kroger's takeover of rival grocery chain Albertsons.
While California often works with federal enforcers, Bonta's office has also levied criticisms against some settlements that cleared the way for mergers.
California, for example, is part of a coalition of 13 states opposing a Justice Department settlement allowing Hewlett Packard Enterprise's $14 billion acquisition of Juniper Networks.
Over the past few years, Bonta's office has staffed up on competition enforcers under the leadership of antitrust head Paula Blizzard. A longtime state antitrust enforcer, Blizzard previously worked at the DOJ and at the Federal Communications Commission, which enforces federal regulations on broadcasters.
(Reporting by Jody Godoy; Editing by Chris Sanders and Nia Williams)
