Larry Ellison Pledges $40 Billion to Bolster Warner Bros. Bid

0:00They told us to expect change. They warned us about the transition. But honestly, they forgot the best part. This is the chapter where we finally focus on us. LifeMD delivers expert menopause and midlife care right from your home. From hormone health to holistic wellness, LifeMD helps you feel your best for the best years of your life. LifeMD, it's just getting good. Visit LifeMD.com slash goodlife. So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need.

0:40Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions. Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM. For many men, mental health challenges aren't recognized until they've already taken a toll. Work pressure, financial stress, changing relationships, and traditional expectations around masculinity can quietly wear men down, often without clear warning signs. In season three of The Visibility Gap, Dr. Guy Winch and his guests explore how these pressures show up, how to spot them earlier, and how men can access meaningful support.

1:23Listen to the new season of The Visibility Gap, a podcast presented by Cigna Healthcare. This podcast is brought to you by Wise, the smarter way to manage your money internationally. If you're getting a headache from juggling different currencies and different bank accounts in different countries, there's a better way to receive money in the currency you need without the slow transfer times or hidden fees. Meet Wise, the savvy way to handle your money internationally. Hold balances in up to 40 currencies with the mid-market exchange rate on every conversion, whether you're receiving payments from tenants abroad, earning as a digital nomad, or converting dividends from your international investments, the Wise Multicurrency Account is for you.

2:02Be smart. Get wise. Download the Wise app today or visit wise.com. Terms and conditions apply. Bloomberg Audio Studios. Podcasts. Radio. News. This is Bloomberg Business Week Daily. Reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy, plus global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily Podcast with Carol Masser and Tim Stenevek on Bloomberg Radio. The fight for Warner Brothers Discovery, guess what? It's not over yet, not by a long shot. Both Netflix and Paramount Skydance are now strengthening their financial backing for their respective offers.

2:51So where do things stand right now? Let's get a check in with Bloomberg News Media editor Molly Schutz and Bloomberg Intelligence senior credit analyst Stephen Flynn. They join us here in studio. Thanks so much for being with us. So Molly, I'm just going to start with you. Just bring us up to speed on what Larry Ellison is saying here. I guess he's throwing his own personal fortune behind this deal to say, hey, listen, we're good for the money. That's right. He's putting his name on the line. He's saying, I'm personally backing this$40 billion in equity financing to help his son, David Ellison, who's the CEO of Paramount Skydance, succeed in their takeover offer for Warner Brothers.

3:32But, okay, so I want to bring in Stephen here. Larry Ellison is the fifth richest person in the world with a fortune of around$246 billion. Are there any credit risk implications of his personal guarantee? or like this having a billionaire really backstop meaningfully and extend the runway for deals like these? Yeah, sure. So it's important. You have the backstopping of Larry Ellison. You also have a lot of other funds involved. And importantly, they also have a$54 billion secured credit agreement in place. So there's plenty of financing to support the$30 per share cash offer for the tender offer for Warner Brothers shares.

4:06So Netflix, though, was talking about a bridge loan, right, of nearly$60 billion. If you had to stack it up, because I'm sure the board at Warner Brothers is going through this whole pros and cons list. How do these two, Molly, I'll ask you first. I'd like both your thoughts on this, but how do these two deals stack up next to each other when you're talking about, I'm just talking about the financing of the debt. Is there one that just seems more plausible or more attractive than the other? I think the latest offer by Paramount today shows that that was their effort to say, look, we've got the solid footing here.

4:44This will help with credit investment grade, help our investment grade, and show that we're serious and that this bid is solid, which Netflix already has an investment grade rating and was seen originally as having a better solid financial footing. What are your thoughts? Listen, Netflix is a much, much stronger credit than Paramount Skydance. Netflix has a single A rated balance sheet. They have a large market cap. They have growing EBITDA, growing free cash flow, and very, very low net leverage. So Netflix has plenty of capacity to borrow in the investment grade corporate bond market. Now the company has single A credit ratings.

5:24I believe Moody's has already affirmed their single A rating. I expect S &P to do the same. So they have plenty of capacity. On the flip side, Paramount Skydance, they have a bridge commitment in place. So the commitment is there from a number of large banks. Now, that is secure debt, and they will probably strive for investment-grade ratings on that secure debt, saying, hey, this comes ahead of the other debt that the company has. And if you use charter as a comparison, you could have a split-rated capital structure where you have secure debt that's rated investment-grade and certain other debt, whether it's unsecured or security that's inferior to the security provided to the other debt with high yield ratings.

6:04So you can get creative with the way you sort of stack the debt, if you will. Yeah, plenty of companies get very creative. I bet. So that structure aside, talk to us about a media tech standpoint. What will it look like if the company merges with Netflix or with Paramount, which makes more sense? Well, both Netflix and Paramount think their deal makes more sense. For Netflix, obviously, it gives them direct access to the library, one of Hollywood's most iconic libraries for film and TV content with Warner Brothers. And that's also what Paramount technically is trying to do. Paramount Plus is a much smaller streaming service right now than Netflix.

6:46So they're really seeing this deal as a way to bulk them up and allow them to compete better with the likes of Netflix and Amazon and Disney. Is this Larry Ellison offer now a last-ditch effort, do you think, by Paramount Skydance? Because we know that Warner Brothers is already saying, listen to the shareholders, we want you. We believe that Netflix is a stronger deal. We want you to vote that way. Do you think we're going to hear yet again from Paramount? And what might that be? Might it be a sweetened offer if this doesn't work? Yeah, well, so mid last week, the Warner Brothers Discovery Board recommended shareholders do not participate in the tender offer.

7:23And they listed reasons why. Now, what Paramount this morning has done is kind of address many of those reasons, particularly given the Larry Ellison guarantee. So I believe Paramount's going to see how many shares they get to participate in the tender offer. And if they need to, you know, conversations with shareholders, if they need to raise it to a certain level that they're still comfortable with, I imagine that's what they would do. Talk to us about the size of this deal, because our Bloomberg story said something like it's the biggest in a decade. It's definitely one of the biggest media deals in a long time.

7:54I mean, it harkens back to the days of Disney and Fox, those kinds of deals. I mean, this is definitely a big deal, both financially and also in terms of what it means for Hollywood and for content production and the creative industries at large. Is the debt financing now, you think, the deciding factor here for the board of Warner Brothers? Is this what it's going to come down to for them, do you think, Stephen? No, because I don't think if you have a commitment in place, that's why companies get bridge loans to say that, hey, we're good on the debt part. Look at the financing here. It's provided by a slew of banks.

8:30So that typically provides companies with some comfort that the debt component is going to come through. I think what Warner Brothers was asking for more comfort on the equity side, right? Because there's over$40 billion of equity capital as part of their acquisition proposal for the Warner Brothers shares. How does Ellison's bet change Paramount's position relative to Netflix, YouTube, and Amazon? Does it enable a different operating model, or is it just really scale at this point?

9:00I think it's mostly scale. Yeah, Paramount's argument is that we will be a good steward of this content, and this will allow us to... Because Paramount Skydance is a pretty small operator in terms of if you're looking at compared with Disney, Netflix, even Amazon. And so really having a studio like Warner Brothers behind them and to be able to tap into that library of content would really be a step up for them. But I guess a big difference between these two offers is Paramount Skydance wants the whole thing, including CNN, right, TNT, where Netflix doesn't want that. They want the studios and the streaming service.

9:40So what if Netflix does win this bidding war, what happens to CNN and those cable properties? So the way the Netflix deal is set up is that they're going to have Warner Brothers Discovery spin off their global networks business. That includes many of the channels that you described here. And what will be left behind is the studios, which is very valuable, and the streaming business, which is very valuable. And then Netflix will acquire that remaining company. And that's what makes it a little bit tough to compare the valuations here, right? Because Netflix was offering$27.75 per share, mostly cash, but some Netflix stock for the remaining company.

10:16So investors had to figure out, okay, what's the per share value in the global linear networks that's being spun off? Paramount Skydance is saying, hey, that's only worth a dollar. Some people are saying, well, that's worth several dollars. And so that$27.75 plus the value of that stub piece is your total value compared to$30 a share in cash from Paramount Skydance for the whole company. Which one is the front runner here so far in your opinion? Well, clearly from the board of Warner Brothers, Netflix is, right? They accepted Netflix's offer. They put out a letter last week saying that why investors should reject the Paramount Skydance offer.

10:55So it's hard to break a deal. It can happen, but it's hard. So it seems that Netflix, given what's going on so far, is ahead. But something tells you that this is going to last quite some time, right? Paramount Skydance has significant financial backers. They really want this. You could argue that they really need this. They need to gain scale. And so they're motivated. So I think we still have a ways to go in this. So if this thing drags into 2026, which it looks like it very well might, we know the media landscape's continuing to change. Let's just say, you know what, Paramount doesn't get Warner Brothers.

11:30What does Paramount do? Or do they eye another company? And if so, who might that be? I mean, I think that's the big question now. Where will they go from here? David Ellison has said, I mean, despite the fact that, yeah, he really, really does want this company, he says, well, okay, if we don't get it, we'll be able to proceed and we'll still continue to produce great movies and great content and we'll find other ways to grow and to compete. Yeah, let's remember, Paramount Skydance was recently formed, right? You merged, you had David Ellison Skydance merge with Paramount, and then they took out the national amusements on the Paramount side.

12:08So that company was just formed. They had a plan. They were going to cut costs, grow certain areas, and so improve the overall business. And now Warner Brothers would give them a certain amount of scale. If this doesn't work out, I'm sure they could look for other assets for additional scale. All right, we're going to have to leave it there. But certainly, we're going to see how this all plays out. as I guess the board continues to look at these deals through the holiday. I think a lot of folks thought that, well, maybe we can wrap this thing up. Netflix might have thought we can wrap this thing up and I'll celebrate the new year.

12:36But there are still lots and lots of question marks. Our thanks to Bloomberg News Media Editor Molly Schutz and Bloomberg Intelligence Senior Credit Analyst Stephen Flynn for being here in our studio to help break down what really has become a quite complicated scenario for all of these companies. Lots of tangled webs. So thanks a lot for being with us. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

13:23for the best years of your life. LifeMD, it's just getting good. Visit LifeMD.com slash goodlife. Support for the show comes from Public. Public is an investing platform that offers access to stocks, options, bonds, and crypto. And they've also integrated AI with tools that can assist investors in building customized portfolios. One of these tools is called Generated Assets. It allows you to turn your ideas into investable indexes. So let's say you're interested in something specific. like biotech companies with high R &D spend, small cap stocks with improving operating margins, or the S &P 500 minus high debt companies.

14:03Chances are there isn't an ETF that fits your exact criteria. But on public, you just type in a prompt and their AI screens thousands of stocks and build a one-of-a-kind index. You can even backtest it against the S &P 500. Then you can invest in a few clicks. Go to public.com slash market and earn an uncapped 1 % bonus when you transfer your portfolio. That's public.com slash market. Add paid for by public holdings. Brokered services by public investing member FINRA SIPC. Advisory services by public advisors, SEC registered advisor. Crypto services by zero hash. Sample prompts are for illustrative purposes only, not investment advice.

14:39All investing involves risk of loss. See complete disclosures at public.com slash disclosures. Small businesses are the pulse of every community. They bring people together, create opportunities and drive growth. With a widespread presence in communities across the country, Chase for Business supports small business owners at a local level. That makes it possible for you to connect, learn from each other, and grow together. There's a real commitment to seeing small businesses succeed. The Chase for Business team has knowledge and expertise that span a wide range of financial areas. They can help you make more informed decisions as you navigate the complexities of running your business.

15:16They'll help your business grow with individual guidance and convenient digital tools all in one place. With that guidance and your determination, you can take your business farther and help build a brighter future for your community. Learn more at chase.com slash business. Chase for business. Make more of what's yours. The Chase mobile app is available for select mobile devices. Message and data rates may apply. JPMorgan Chase Bank N.A. Member FDIC. Copyright 2026. JPMorgan Chase and Company. Deadlines move, plans change, and sometimes opportunities pop up out of nowhere. When you need branded gear fast, 4imprint is ready to deliver.

15:554imprint offers hundreds of promotional products in their 24-hour category. Everything from custom apparel, bags, and drinkware to writing tools, trade show staples, and high-tech gear. At 4imprint, they're focused on getting the details right, printing your logo with precision, packing your order with care, and shipping it out fast. And it's backed by their 360-degree guarantee. That's 4imprint's promise your order will show up right on time, just the way you planned it. That's what it means to be 4imprint certain. So, if you're prepping for a last-minute event or jumping on a big opportunity, you don't have to settle or scramble.

16:30With 4imprint, fast, reliable service and peace of mind are built right in. Check out their full 24-hour selection at 4imprint.com. 4imprint. 4certain. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube. So, Alexis, it's been really a stellar year for markets in the U.S. and across the globe. And we've talked about how the S &P is on track to see its eighth winning streak, its longest winning streak since 2018. And already next year is looking quite optimistic.

17:09We have sell-side strategists really putting their price targets for the S &P out there. and the range is around 7 ,000 to 8 ,100. That's quite the range. It's quite the range, but it's high. For context, we're around 6 ,800 to 6 ,900 at this point. And it's really hard to make sense of the markets next year because we have a lot of optimism, but we do have a lot of uncertainties as well. And joining us to make sense of all of that and to give us a look ahead is Khoeng Wen. She's the Chief Investment Officer of Equity Strategies at the Research Affiliates. She's with us in the Interactive Broker Studio.

17:41So thank you so much for joining us on this Monday to help us make sense of all of this. We're seeing a bull market right now, and it's a bull market that's broadening beyond mega cap tech into mid caps and small cap stocks. Absolutely. Why does that matter to make this rally durable? I mean, I think that when you have very, very narrow leadership, the danger is always that there's a hiccup in something or whatever it is that's driving that narrow leadership. And we saw that recently with the whole AI story, people wondering whether or not these stocks are overvalued. But I think one of the things that you're seeing is that a lot of other stocks are benefiting as well.

18:14So as long as people have a lot of options to choose from that continue to do well, people will stay invested. Do you have reason to believe we're going to branch out from the sort of narrow stocks we've been looking at driving the rally this year? And by that, I mean, are we going to break out of AI and start to see some opportunity elsewhere? I think we're already beginning to see that. I mean, if you take a look at what's happened in the markets this year, everybody is focusing on the Mag7, right? Everybody's focusing on NVIDIA, on Alphabet. But if you really think about it, NVIDIA was not the top performing chip stock this year.

18:54NVIDIA is up something like 36%. And you have Intel. Remember that stock from long ago? That's up 82%. So I think you're already beginning to see broadening out within technology itself. but you're also seeing broadening out to other sectors. Financials are doing well. Healthcare stocks are seeing signs of life now. So there's massive capital flowing into AI and short term we're seeing who are the winners but not everyone will be a winner longer term. So how real is the risk of overinvestment in AI? Because already we have investors kind of feeling jittery that it might not be paying back at least in the short term horizon.

19:31Sure, I mean I think that one of the things that we see is that the companies that are investing in AI are really strong cash-flowing companies. They're very, very strong. There is some debt behind this, but it's not an overwhelming amount of debt. So I do think that there is the risk of overinvestment. I don't necessarily see a real risk quite yet, but also I think it's really hard to pick who the winner is. So the best way to invest in this is to stay diversified. We're most likely going to be in an environment of lower interest rates. I mean, it looks like the market is banking on two interest rate cuts.

20:06As long as we don't get an interest rate hike anytime soon, we might very well see these financials do well, these smaller and mid-cap stocks do well. But is there an area of this market you wish was seeing a little more love that isn't, that maybe should be and that people are just overlooking? So one of the areas that I do think is highly overlooked is really the consumer sector, right? So you see a lot of the large names, consumer discretionary doing poorly. I mean, Walmart's done well this year, but you see a lot of companies not doing so well. You see Target, for example, a beloved American brand.

20:44And again, there the issues are changing consumer taste of whether or not they can keep up. I love that you're in your talking points. The very first one is short term. Interest rates are coming down. Everything else is commentary. Is that really the story right now? Are investors already looking past beyond the rate cuts? No, I think that if you take a look at what drives markets, markets just tend to go up. They stay with whatever momentum it is unless something happens to change that. And what usually happens, what's usually necessary to change the upward trajectory that we're in right now is a tightening of financial conditions.

21:20If you take a look at bear markets, meaning they go down 20 % over a certain period of time, they're always preceded by some sort of tightening financial conditions. And we're not seeing that right now. I do think that lower interest rates are benefiting U.S. equities, but they're also benefiting non-U.S. equities, namely emerging markets as well. So I think investors are going to have a variety of opportunities to choose from next year. I'm really glad you brought up EM, because emerging markets have sort of been the sleeper story, I think, of the year. They've really done quite well. And even Europe has sort of come along for the ride.

21:56So if you're looking for opportunities to diversify outside of U.S. equities, where in particular might you be looking next year? Oh, I definitely think emerging markets are exciting, particularly China. I mean, China got so cheap. And what you're seeing there is, yes, there are difficulties with growth, but I think you have a lot of world-class companies there. A lot of money was flowing out of it. Now money's flowing back in because of the valuation opportunities. We're also seeing more of a stabilization of the trade situation. All of these things really do help emerging markets a lot. And I want to go back quickly.

22:30You've pointed out that AI is already changing the investing landscape, especially in the startup world. How does AI lower the barrier to entry compared to other tech super cycles? So I think AI is just the most recent tech super cycle. I mean, if you really think about the tech bubble, you know, the late 90s, if you wanted to throw up an e-commerce company, Pets.com, for example, you had to go out and invest a lot in computers and servers and bandwidth. It was very, very expensive to have a startup. The cloud came along, and essentially you could just license a lot of this stuff out, right? It became much, much more cost effective or less capital intensive to have a startup.

23:12And I think now what you're really seeing is on the software side, you're getting a lot of benefit from AI. What I'm hearing from people is that if you wanted to start up a company like Uber or Lyft, you need a lot of coders, right, to create that entire code base for you. But now with AI, all coders are becoming, or at least the coders that know how to use it, are becoming much more productive. You need to hire far fewer people. That said, it's most beneficial when you have a new code base, right? So if you have an existing code base, it's not nearly as productivity enhancing. And so in some ways, I think one of the things that we're seeing is that I wouldn't be surprised if there was a lot more new ideas being put into play in the venture world, a lot more disruption that happens in technology.

24:01All right. We're going to leave it there. Kwe Wynn, Chief Investment Officer, Equity Strategies with Research Affiliates. Thanks for coming by and giving us your thoughts on where the market is now and headed into the new year. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

24:22This is the Bloomberg Businessweek Daily podcast. Listen live each weekday starting at 2 p.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa. Play Bloomberg 1130. Things are shaping up to be sort of a festive end, if you will, Isabel, to the year for the markets and a solid start to the new year. We have the stops now. U.S. equities erasing those December losses. The S &P set for its eighth straight month of gains. It seems like the Santa Claus rally is really shaping up. And Santa Claus rally is, of course, the last trading days of December, the five last and the first two in January.