Larry Ellison Guarantees Paramount’s Bid for WBD

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1:11Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Ludlow in San Francisco. This is Bloomberg Tech coming up. Paramount Skydance amend its bid for Warner Brothers Discovery, This time, including a personal financial guarantee by Oracle chairman Larry Ellison. Plus, Chinese chip makers are rushing to the IPO market. After back-to-back listings surge, we discuss the ongoing global AI race. And New York Governor Kathy Hochul signs a bill to restrict the most advanced artificial intelligence. We discuss a regulatory landscape building in the United States. But first, we check in on these markets at the moment that are building too.

1:54We're building towards what has been a spectacular year for the NASDAQ 100, up more than 20%. We're up 0.4%. We're fading some of the initial gains at the open. But really more broadly, this is about big tech AI anxiety, just pulling back a little bit and actually people putting money on towards this shortened trading week. We delve into the individual movers. One is being driven by breaking news right now. Alphabet, we check in on their particular shares in a moment for you. But now I'm looking at the media landscape. Let's go to Alphabet because we're trading flat. But this is news breaks that it's actually making a big acquisition in the world of energy, Intersect Energy, helping them develop their overall data centers that are becoming sprawling and ever more necessary here in the United States.

2:35But they need the energy infrastructure with it to do that. $4.75 billion, including debt for this particular private equity backed company, which is still building out in Texas for other clients than Alphabet. So keep an eye on what's happening in the world of energy and Alphabet. move on from Alphabet and look at what's happening in the media industry because that's what drives the trade and all the talk on the day. Paramount, Skydance, basically the Ellison's back with an amended deal. They will pay more if indeed they were able to clinch Warner Brothers' discovery but it failed to go through to$5.8 billion if the deal didn't happen.

3:08But more broadly, they're saying, by the way, we're good for the money. We're going to give a personal guarantee from Larry Ellison, David Ellison's father, to ensure that the money, the$40 billion of equity there that they'd be doing to help purchase Warner Brothers Discovery is intact. Netflix on the downside is perhaps there's more tussle at the top for this particular asset. Let's get Chris Palmare's take on all of this. You're out covering the world of media. Boy, is entertainment and media on tenterhooks at the moment, Chris. What do you make of this amended deal? Because the price doesn't change.

3:39It's just the guarantee on the money. So an extraordinary amount of steps on Paramount's part to address the concerns that Warner Brothers had identified last week and why they didn't pick them to begin with. So quite a lot there. The personal guarantee from Larry Ellison, one of the issues was this was being backed by a revocable trust. What if he revoked it? A lot of other changes to terms in terms of their ability, Warner Brothers' ability to operate in the interim period before something's improved. They extended the tender date. A lot of changes, everything but raising the price. And that's a big issue, because if Warner Brothers did decide to not go with Netflix and go with another suitor, they would have to pay Netflix$2.8 billion, and somebody's going to have to pay that.

4:24So everything but a change in price. And then, Ford, does it all come down to what you think the cable networks are actually worth, Chris, If they indeed manage to convince David Zaslav that they're good for the money, is this more personal for David or is this more about the price of the networks? You know, it does go beyond all of that, for sure. Right now, there is this difference in how you because, you know, Netflix is not buying the cable networks and they're worth, Paramount says, only a dollar a share. Other people say three or four dollars a share. That's a big part of it. But really, when you also saw that letter and filing last week from Warner Brothers, they talked about having a stronger balance sheet long term, which Netflix undisputably has, about fewer cuts of jobs because Netflix really doesn't have a studio in lot like Warner Brothers does.

5:19So they wouldn't they aren't promising as many cuts as Paramount would. So better for Hollywood is one of the things Warner Brothers said. So those sort of intangible things are also part of the mix. Chris Palmari running us through what is a very complex Hollywood shakeup. In fact, we talked about this last week. Remember, Kevin Mayer joined the show, his Candle Media co-CEO, former TikTok CEO, but also a Disney executive. Here's what he had to say about a potential Paramount comeback. Even though Netflix won the first round, don't count it out. The Ellisons, they're incredibly smart and aggressive.

5:53Don't count out Jerry Cardinal, Redbird. These guys are very serious. I think they're going to come back with a higher bid. And when they approached, and remember, shareholders still haven't spoken yet. I think the likelihood of here is that Warner Brothers ends up with Paramount. And I think it's ultimately, it's the cost of jobs, obviously, in Hollywood. There's no getting around that, but ultimately good for creators. I mean, he helped found Disney+. What, therefore, for Bournemouth Brothers Discovery saga? John Klein's with us, co-founder of Hang Media. You're, of course, the former president of CNN.

6:22You know the inner workings of media right now, John. Do you think that the deal has to be sweetened? It can't just be about more for a breakup fee or good for the money in terms of Larry Ellison? Yeah, you know, it's a very clear picture of who's got the leverage here. Clearly, WBD has suitors. And David Zaslav can just sit and fold his arms and say, look, you're not talking in my good ear yet, Paramount. And it's not a dumb way to try to drive their offer up even higher. And that wouldn't surprise me. What do you think could be the quibbling around the cable networks? That's the area that you knew, you loved, you performed in.

7:03And there has been, of course, the regulatory concern about who ends up owning CNN. but more broadly about what they really are basically priced at, John. Yeah. And, you know, value really depends on the acquirer. And there could very well be acquirers out there in the universe of media who value those cable networks much more highly than a Netflix would or even Paramount would. And, you know, you could see where Versant, for example, which is being spun off from Comcast, which is identical to the cable spinoff that WBD is doing. You could see them valuing TNT, TBS, True TV, CNN much more highly than these current players are.

7:52So value is in the eye of the beholder. I could see the local station giants like Nextstar and Sinclair, also loving the idea of having both the national footprint as well as their ever-growing roster of local stations. So, you know, there could be even more money available to WBD if they go ahead and sell those two components separately. I see. What would you think would happen if, and it's a big if, Paramount Skydance got hold of all the assets because Netflix, we know if that deal gets done, the cable networks would be spun off. But if Paramount Skydance took hold, what do you think then would be the evolution here?

8:32Well, they could still do a spinoff of their own cable properties and broadcast properties. There's all kinds of financial engineering that could then take place. I don't know that it would happen overnight, although this new Paramount management team has moved extremely quickly. David Ellison gets a lot of attention. But Jeff Schell, who was the chairman of NBC Universal, is a fantastic operator. And I could see them moving quickly. However, it sort of reminds one of the snake that eats the deer. It's, you know, it unhinges its jaw and it spends the next three months just trying to move that thing down the tunnel.

9:15And it could take a while for all of these synergies to be realized. How important is the Ellison relationship with the administration at this point, John? Because that's in many ways what they thought would clinch the deal. It's been reported. Well, much as David Zaslav is able to sit there and play one side off the other, so is Donald Trump in a similar position where he has not put his finger on the scale yet in favor of Paramount's offer, despite his relationship with Larry Ellison. And he has said very nice things about Ted Sarandos, the co-CEO of Netflix. And I think that Donald Trump is enjoying being in a position to see who can curry more favor with him.

10:01So there's no reason for either President Trump or David Zaslav to pull the trigger on anything just yet. They want to see how these deals all get sweetened. I suppose the other contingent of stakeholder who is sat there with their arms folded is the investor base right now. They've got what until January the 21st to digest whether this go direct in way the Ellicens have approached them, Warner Brothers Discovery shareholders to be clinched versus going with Netflix. What would you say to an investor who's holding Warner Brothers Discovery shares right now? That there's plenty of time for this deal from Paramount to go even higher.

10:43So one way or another, WBD is going to be making out very nicely. History has shown us that the sellers in these media deals tend to make out better than the buyers. So they're in a pretty good position in that respect as well. You look at Disney's acquisition of the Fox assets a few years ago, and Disney's valuation has dropped significantly at least since then. And Rupert Murdoch is counting his money. So they're in a decent position and there's no need to get too worked up just yet. Plenty of time for the dollars to increase. What's so interesting about your trajectory in media is you've sort of been able to see around the corners.

11:25You were in the heart of news, the in the heart of production. Then you went into the world of AI selling while helping manage a business. Eventually went to Apple. You're with Hang Media at the moment. What does all of this mean for Hollywood and for content creation right now? Well, we're on at the very beginning of a content creation explosion. And this deal, however it turns out, is taking place within a much larger environment in which creators who are being distributed by YouTube and TikTok are commanding much more viewing time than the traditional producers, writers, directors, and most of all, studios.

12:11And so in a lot of ways, this battle for the assets of WBD is really all about the way media used to be. But the big winner here is YouTube, because nobody's keeping their eye on that. I mean, YouTube made headlines last week. They just stole the Oscars from ABC. beginning in 2029, YouTube is going to be where you go to watch the Oscars. And listen, in the 2030s, I think all those tech giants are going to be running media and all of these other companies will be significantly smaller. And we're just seeing the beginning of this. So in a lot of ways, this matters a lot to the shareholders for WBD, Netflix, Paramount, etc.

12:54But in terms of the long-term trajectory of the media industry, that's all happening somewhere else. And certainly that's one the regulators had to digest. What really is the market that a Netflix plus Warner Brothers Discovery would be competing in? John Klein of Hang Media, it's always great to catch up with you. Happy holidays. Thank you. Coming up, Google is buying insect power to help build out its energy infrastructure for AI products. We delve into that next. This is Bloomberg Tech.

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14:40Google has agreed to buy power provider Intersect Power for$4.75 billion in cash plus existing debt. That says the tech giant makes a push to grow its data center presence. Greenberg's Josh Shaw joins us now to discuss. Shares are moving higher, up about five-tenths percent, Josh. Why is Alphabet getting ever more into the world of clean energy? Ever since we saw tech companies needing a lot of electricity for their data centers, there's been a conflict between utilities, traditional power providers, which move slow, make sure that nothing ever breaks. Grid reliability is paramount for them. Tech companies want to move really fast.

15:20They want to get a ton of power. They're not against breaking things. This is an example of a big tech company saying, we're just going to bring a whole power generation company. We're going to bring that in-house so that we can really quickly develop a lot of clean energy to power a lot of our data centers and our AI dreams. InterTech Power is an interesting company. It's been backed by private equity players such as TPG. But they actually build out, particularly in Texas, not just for Alphabet. So they've got other clients on their books. How is this actually going to work from an M &A perspective?

15:55That's interesting. I'm not sure how that's going to get worked out. But I think what it means for Google is that they'll be obviously front of line and able to build a lot of clean energy on site with its data centers. Something that that allows Google to go even faster with is it won't have to build big transmission lines. If you have power plants or solar and wind farms somewhere, and then you have to permit transmission lines to move that electricity long distances to get to the data centers, what Intersect is good at and what Google has expressed interest about in the past is building those big solar and wind farms on the exact same site, basically ringing or adjacent to the huge AI data centers.

16:38So that means that the electricity can just flow directly into those facilities. Suna Pichai, Chief Executive Officer of Google and parent company Alphabet, talking about how it's going to expand capacity, going to operate nimbly in building new power generation in lockstep with the data center need. They are not the only player needing to expand in data centers. Is this kind of going to become thick and fast? These sorts of energy assets are going to be really interesting to some of these big hyperscalers. Yes, for sure. We've seen all the big hyperscalers making different moves in the energy space in a way that they wouldn't have in past years.

17:14I've reported this year on Meta getting into power trading. That's so that they're able to help energy generation get brought online faster, more at the cadence that they want, as opposed to the frequency and speed with which power generation has been provided in the past. So, yeah, basically, to a company, you can expect all of the big hyperscalers to be making different moves in the energy space to try to make sure that they're getting as much electrons, as many electrons as they need for their big AI goals. Josh, it's going to be a busy one for you in 2026. Thanks so much for talking us through this particular deal.

17:53We appreciate it. Josh Saul there.

18:01Chinese chip makers, they are rushing to IPO. Following some blockbuster debuts that we've just had as recently as last week, There seems to be huge demand for future national champions that analysts say could one day rival even the likes of NVIDIA. But does that enthusiasm mask technological challenges facing these firms? Bloomberg's Maggie Eastland, who covers Chips, joins us now. The context of this is almost a 700 % pop in MetaX that debuted last week. We've got other of the so-called four little dragons looking to IPO. It's all about domestic national champions. Exactly, Caroline. So China is certainly putting a lot of support behind these chip champions, and there's no shortage of capital.

18:42Bloomberg has reported on an incentives package for semiconductors of up to$70 billion. So the push for domestic chip companies is alive. It's strong and well. The questions come in when you look at the technological challenges. So Chinese chip makers, you could look at Huawei as one of the top champions. And this year, we're still relying on foundry services from TSMC, as well as memory from Korean providers. So, you know, it's a key question. What is going to happen once China actually makes that shift to relying on SMIC and relying on their own manufacturing, where the yields are kind of questionable?

19:16Okay, so they've got to get the foundries in place. They've got to, of course, many are conjuring what the ASML competitor is over there as well, Maggie. But take us back to some of the other reporting that's in the market today that H200s from NVIDIA will start being produced and being able to be issued into China. I mean, we haven't heard from the government. But what do you think about the need, the use case of H200s? Of course, when you look at H200s, I think one of the key questions going forward is how is this going to affect the ecosystem of Chinese model companies? You know, last year we had this deep sea moment.

19:52And that is very intertwined with access to chips. Of course, now it's widely known that DeepSeek accessed A100s. Those are NVIDIA chips that are less powerful than the H200s. So what is going to happen once China is able to access, if they accept the H200s, what does that mean for the Chinese model companies? Will they grow more competitive? There was a story today on Bloomberg about Zipu and Minimax and their revenue. We're just seeing some numbers. They're not quite as high as OpenAI and Anthropic. But this is a key area of interest going forward, right, given that they're no longer going to be as hindered by their lack of access to advanced NVIDIA chips.

20:29Maggie Eastland, it's going to be a fascinating trend. You're continuing to watch for us. Thank you. Let's talk more about the geopolitical issues at play here between the U.S., between China. Eliza Tobin's with us, Managing Director at Garnot Global. All of this is so interesting as to whether or not, indeed, NVIDIA gets access to China, whether we see a TikTok deal, whether we see continuing trade issues between U.S. and China iron out. If we talk about chips in particular, what have you made of the ferocious focus on domestic supply chain resiliency coming from China? Yeah, it's a great question, Caroline.

21:04And I agree with Maggie just now that, you know, the H200 is really going to be a boon for some of these Chinese AI companies. As we've seen over and over again, compute is really the bottleneck. But I want to go back to what you said about the TikTok deal. You know, we heard the news a few days ago. It hasn't yet been finalized. And I think a lot of investors are going to be analyzing what is the structure of this deal. But what I think is more interesting is what appears to be the case is that ByteDance, the parent company that owns TikTok, is going to maintain control over TikTok's algorithm.

21:42This, of course, is the special sauce that makes TikTok what it is, that makes it so addictive and so special in the first place. And I just want to remind your audience that Beijing has never agreed to turn over control of this algorithm over to these U.S. investors. And that's really at the heart of the deal. So what you see is, as the Trump administration keeps trying to come up with some kind of a deal to end this TikTok saga and keep it in the United States. It keeps kind of lowering the bar on this deal with Beijing over TikTok to the point where now we're probably going to be settling on a deal where Beijing, through ByteDance, maintains control over this algorithm and this vector of influence over American discourse and what hundreds of millions of people are seeing on this app every day.

22:34So, Liza, are you saying when the talk is, the reporting is that they will be able to license the algorithm and then rebuild it? You don't think that they will be rebuilding? You don't think there will be some sort of retraining? We'll still be dependent on ByteDance's underlying algorithm? Yeah, I mean, color me skeptical. They've been working on this, you know, so-called security deal for quite some time. But the reason that the Congress on a bipartisan basis passed the law in the first place and then the Supreme Court upheld it was because they did not see it as viable for U.S. national security for a adversary controlled company, you know, ByteDance and TikTok to be maintaining control of this algorithm.

23:20So I think they're going to be putting some kind of lipstick on the pig and some kind of security arrangement in place. But remember, going all the way back to 2020, Beijing put export controls on this algorithm. Those haven't gone away. Beijing has never budged in its stance. It's the U.S. side that has kind of lowered expectations over and over again. And the deal still isn't done yet. Liza, very briefly, is national security at risk, if that stands? Yeah, you know, we can make an analogy perhaps to the Cold War. It's almost as if during the Cold War we let the Soviets take control over some of our major newspapers.

24:01Or imagine today if Bloomberg TV were up for sale to the Russians or the Iranians. What's somewhat ironic is that last month the Trump administration put out its national security strategy. You can see it on the White House website. And it makes the point over and over again that foreign interference in U.S. media is a problem. And yet, here we are on the verge of this deal with TikTok with Beijing maintaining control. Liza Tobin, Managing Director at Garnet Global. It's great to catch up with you. Thank you. This is Bloomberg Tech.

24:43Welcome back to Bloomberg Tech. Let's check in on these markets because we're on risk-on mode. It is a shortened week ahead of the holidays. People selling up their books and just trading into this tech market. We're seeing Nasdaq 100 up five-tenths of a percent. In fact, it's on course to delivering more than 20 % growth for the entire year. So big tech remains on top even as we still have some AI anxieties around. We're seeing less anxieties around crypto today. We're up more than 2%, but look, it is down on the year by some 4%. We have only seen that a handful of times for the OG in the crypto space.

25:13keep an eye at the$90 ,000 level. Let's move on and look at the individual players in the NASDAQ 100 that you want to keep an eye on because it's all about M &A in media and the tussle at the top for what is a prize asset, a Warner Brothers Discovery. It's trading up 2.9 % because we seem to have an amended offer coming from the Ellison family. This one, Paramount Skydark, saying, look, we'll pay more if there's a breakup fee and also we guarantee the money coming from Larry Ellison, David Ellison's father. Meanwhile, Netflix off by 7 tenths of a percent as it looks as though there might have to be a bit more of a bidding war or indeed some sort of worry that they might not clinch the deal.