Paramount Board Approves Exit From California if Deal With State Isn’t Reached by October 1

The key takeaway from Matt Belloni’s Puck report is quite simple, really: David Ellison has given his Paramount leadership team a stark ultimatum over the company’s legal battle with California regulators and the proposed $110 billion Warner Bros. merger.

At a lunch meeting last Wednesday, Ellison—who still believes Paramount will win the antitrust case—authorized plans to relocate Paramount/Skydance if California AG Rob Bonta refuses to negotiate. Ellison reportedly set October 1 as the deadline: if the dispute remains unresolved when the deal’s roughly $7 million-per-day “ticking fee” begins, he could move Paramount or the merged company out of California, initially relocating its headquarters and eventually shifting many studio jobs elsewhere.

The proposed move would be driven largely by economic considerations. Ellison estimates that leaving California could save about $500 million annually in taxes, while selling the Paramount lots could generate additional billions. He’s eyeing a move to either Tennessee, Texas, or Georgia.

The moving plan has been approved by Paramount’s board.

California has already had to contend with several major corporations, including Chevron, Oracle, and Tesla, relocating their headquarters out of the state in recent years following disputes with regulators. The last thing the state needs is for one of the major Hollywood studios to leave as well.

MORE: Given California’s regulatory climate, Paramount moving out of the state is entirely plausible. It would be a devastating blow, especially after the departures of other major companies. I don’t believe the threat to move is just a negotiating tactic aimed at pressuring Bonta. If you’re familiar with the Ellisons’ history, you’ll know this is an entirely credible threat, and the message being sent is unmistakable.

Ellison’s reasoning is that if I have to pay billions in ticking fees because I’m being sued by the state, then moving out of the state and selling the lots will allow me to recoup those billions, and pay far less in taxes.