LOS ANGELES, California: Paramount Skydance has reached a settlement with California and 11 other states that had sued to block its US$110 billion acquisition of Warner Bros. Discovery, removing one of the remaining major obstacles to completing the merger, according to a source familiar with the matter.

Under the settlement, independent editorial boards will be created for CNN and CBS, while Paramount will face a $30 million penalty per film for any shortfall against its pledge to release 30 movies annually, the source said.

Paramount, Warner Bros. Discovery and California Attorney General Rob Bonta's office did not immediately respond to requests for comment on the settlement.

The agreement follows months of regulatory and legal disputes over the merger, which would concentrate film, television, streaming and news businesses within the combined company.

Paramount shares rose more than eight percent on September 21, while Warner Bros. Discovery gained more than 10 percent.

Trump administration regulators had already cleared the deal, but a coalition of 12 state attorneys general, led by Bonta, sued in July to block it, arguing that the merger would reduce competition and create a media company with the power to raise prices for movies and television.

The companies said earlier this year that the merger would generate $6 billion in savings, including through cost cuts likely to affect jobs across Hollywood and the CNN and CBS newsrooms. The combined company is expected to carry $80 billion in debt.

Antitrust regulators in other jurisdictions, including the European Union and Britain, have already approved the deal.

Settling with the states will also help Paramount avoid a $7 million-a-day "ticking fee" owed to Warner Bros. shareholders for every day the transaction remains incomplete after September 30.

The deal still faces a separate legal challenge from the Writers Guild of America, which has sued to block it on the grounds that it would reduce pay and worsen working conditions for film and television writers.

The union said in July that a combined Paramount-Warner Bros company would have "both the incentive and the ability to lower costs by suppressing writers' wages and reducing output."

"The final hurdle will be some trade unions that also have a similar lawsuit outstanding, but they'll be hard pressed to hold up this deal without paying the bond that Paramount requested," Morningstar analyst Matthew Dolgin said, referring to a $1.88 billion bond sought by Paramount to address costs resulting from delays to the deal.

"On the merits, I think the unions would have a very low probability of winning their case, so I'd expect that to get settled also," Dolgin added.

The Writers Guild of America did not immediately respond to a request for comment.