Paramount Skydance has cleared a major regulatory hurdle to its proposed $111bn merger with Warner Bros Discovery (WBD) after reaching a settlement with California and 11 other US states that had sued to block the deal.

The settlement includes a requirement for independent editorial boards at CNN and CBS, which would come under common ownership through the merger. Paramount will also be required to spend at least $300m on US film production, compared with 2025 levels, and faces a $30m penalty for each year in which it falls short of its commitment to release 30 films. No divestments are needed.

The agreement follows a lawsuit filed in July by the 12 state attorneys general, who argued that the combination would weaken competition in the US media market, potentially affecting prices, consumer choice and employment. The Trump administration's regulators had already cleared the transaction.

California Attorney General Rob Bonta described the settlement as “a strong antitrust outcome”, while making clear that he did not believe the two companies should merge.

The settlement also removes the risk of a $7m-a-day fee that Paramount would have owed WBD shareholders if the deal had not closed after 30 September.

The Competition and Markets Authority (CMA) approved the M&A in August, concluding that the deal is unlikely to substantially reduce competition in the UK and will not be referred for an in-depth Phase 2 investigation. The CMA probed into the acquisition because Warner Bros. Discovery generates more than £100m in annual UK revenue.

Paramount CEO David Ellison said he expects the deal to close in the next couple of weeks, adding that "closing is really just the starting line. Bringing two companies this size together takes time."

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