Paramount Makes $108 Billion Hostile Bid for Warner Bros

Summary

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Bloomberg Intelligence Podcast

Episode: Paramount Makes $108 Billion Hostile Bid for Warner Bros

Date: December 8, 2025
Hosts: Scarlet Fu & Paul Sweeney
Guests: Chris Palmieri (Senior Editor, Bloomberg News), January “Jen” (Antitrust Expert, Bloomberg Intelligence), Stephen Flynn (Senior Credit Analyst), Anurag (Technology Analyst)

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Episode Overview

In this episode, the Bloomberg Intelligence team delivers an in-depth analysis of Paramount’s surprise $108 billion hostile all-cash bid for Warner Bros Discovery, positioning it against Netflix’s competing offer. The discussion covers deal structure, regulatory and political hurdles, implications for employees and company strategy, credit market impacts, and related industry news.

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1. Deal Structures: Paramount vs. Netflix Bids

Timestamps: 02:17 – 03:11

• Paramount/Skydance’s bid:
  • All-cash offer for the entire company, valued at $108 billion.
  • Seen as “cleaner” in structure compared to Netflix’s offer.
• Netflix’s competing offer:
  • $27.75 in cash + $4 per share in Netflix stock, contingent on Warner Bros’ cable network separation.
  • Valuations between the bids are similar, but regulatory approval processes differ.
• Key Takeaway: The cleaner structure and full cash component give Paramount/Skydance’s bid certain advantages, but overall deal approval will hinge on regulatory and political factors.

“The Paramount deal is all cash and...for the entire company. So those two things make it much, much cleaner than the Netflix one.”
— Paul Sweeney [02:17]

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2. Regulatory and Political Landscape

Timestamps: 03:11 – 06:29 & 11:15 – 15:25

• Regulatory Hurdles:
  • Both deals face intense scrutiny from antitrust regulators.
  • Paramount’s smaller streaming footprint (compared to Netflix) makes its bid more likely to receive approval.
  • Overlap in cable channels under Paramount adds complexity, but is likely manageable.
• Political Influence:
  • Paramount/Skydance controlled by David Ellison (son of Larry Ellison), known for strong ties to President Trump and Jared Kushner.
  • Perceived White House support could tip the scales in their favor.
  • Axios reports Kushner’s firm is involved in financing the deal.
  • In the current environment, political considerations run alongside pure antitrust analysis.

“Politics is a significant factor here, right next to antitrust. And...it seems Paramount's the favored bidder by this administration as well.”
— January (Jen), Antitrust Expert [15:25]

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3. Hollywood & Industry Reaction

Timestamps: 04:06 – 07:48

• Widespread shock in Los Angeles and across the entertainment industry.
• Consolidation fatigue: years of job losses, overseas production, and industry strikes.
• Paramount-Warner would mean more overlap and likely, more job cuts.
• Both merger contenders downplay risks but admit “billions” in annual savings, largely from cutting redundancies.
• The Netflix proposal is seen as less essential for Netflix versus a must-have for Paramount.

“It’s just one of those things that just is shocking to everybody, but particularly to people that work in Hollywood...it’s been a really tough few years.”
— Chris Palmieri [04:06]

“Netflix did say they looked at $2 to $3 billion in annual savings, much of that basically in overhead, redundant jobs...”
— Chris Palmieri [04:58]

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4. Operational Impact on Warner Bros

Timestamps: 07:48 – 08:53

• Prolonged deal and regulatory review create uncertainty and challenges in running the core business.
• Previous mergers (e.g., with AT&T) led to operational paralysis, delays on streaming strategies, and underinvestment—fears are history could repeat.
• CEO David Zaslav’s message to staff: focus on business as usual while the process plays out.

“You don’t even have to look very far to find out...when AT&T bought Warner Brothers...there was a lawsuit, really extended time to close that deal...many people believe it held the company back.”
— Chris Palmieri [08:09]

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5. Antitrust Expert Analysis

Timestamps: 11:15 – 15:25

• Paramount’s bid:
  • Smaller streaming overlap (HBO Max + Paramount+).
  • Lower risk from regulators on content concentration.
  • Cable channel overlap is present but less problematic.
• Netflix’s bid:
  • Merging two giants (Netflix + HBO Max) is much more concerning from a competition standpoint.
  • Higher risk the deal is blocked or subject to massive concessions.
• Termination fees are unusually large ($5–5.8 billion), reflecting skepticism the deals will close and compensating for business disruption if they fail.
• Paramount’s offer could close more quickly (within a year); Netflix’s less likely so.

“The deal that would get done more quickly and has assurance path would be the Paramount deal. So if Warner's interested in getting something closed within the next year, I think Paramount would be the company that they'd go with.”
— January (Jen), Antitrust Expert [14:08]

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6. Credit Market Impact

Timestamps: 17:32 – 23:58

• Netflix’s Financial Strategy:
  • Set to take $59B bridge loan (largest IG deal in years), to be refinanced with ~$25B in bonds.
  • Netflix is a strong credit: A3/A rating, low leverage, high free cash flow.
  • Netflix bonds are scarce; demand is expected to be robust. No issue expected raising the funds.
• Paramount/Skydance’s Financial Strategy:
  • $54B in debt commitments (Bank of America, Citi, Apollo).
  • Paramount/Skydance on edge of investment grade; likely to drop into high yield territory after merger.
  • Combined firms could hit 5x+ net leverage, putting enormous pressure on balance sheets and making it the biggest high-yield name in media.
• Bondholder and Shareholder Perspective:
  • Warner shareholders get cashed out so may be less concerned about future leverage.
  • Paramount shareholders face significant leverage risk.
  • Volatility expected in Warner Bros. Discovery’s bonds due to deal speculation and shifting support.
• Media Debt Sector:
  • Media industry is less favored by credit markets compared to telecom/cable due to unpredictable revenue streams.

“Netflix is a very strong credit...I think that there could be a lot of interest in Netflix bonds. I don’t think it’s a problem at all.”
— Stephen Flynn [18:27]

“Paramount, Skydance is on the edge of investment grade...the combined company could have about $100 billion of debt...That is a lot for the high yield market.”
— Stephen Flynn [19:44]

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7. Notable Quotes & Moments

• “You wait five more minutes and there’s going to be a new headline here on Paramount Skydance vs Netflix for Warner Brothers.”
  — Host/Producer [01:53]

• “Putting two struggling companies together...it raises more issues...that doesn’t always translate into outperformance.”
  — Chris Palmieri [06:48]

• “Termination fee is meant to...protect [Warner Bros.] because their business is just frozen for two years practically. And it does impact a seller’s business.”
  — January (Jen), Antitrust Expert [13:00]

• “Paramount Skydance stock is up 5% today.”
  — Paul Sweeney [21:26]

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8. Bonus Segment: IBM’s Acquisition of Confluent & Strategic Shift

Timestamps: 26:06 – 30:09

• IBM buys Confluent for $9.3 billion in cash as part of broader AI and software focus.
• Move continues IBM’s pivot away from lower-margin services & infrastructure to higher-margin, less capital-intensive software and data platform businesses.
• Part of a series of acquisitions (Red Hat, Hashicorp, Aptio) to reposition IBM for growth.

“IBM’s done a very good job...they have bought a number of companies...Confluent specializes in open source streaming data platforms...That’s going to be helpful as enterprises infuse more AI into their application. So strategically, smart move financially. Also a smart move.”
— Anurag, Technology Analyst [26:39]

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Summary Table: Paramount vs Netflix Bids for Warner Bros Discovery

| Criteria | Paramount/Skydance | Netflix | |----------------------|---------------------------|-----------------------------------| | Deal Structure | All-cash, for entire co. | Cash + stock, partial assets | | Regulatory Hurdles | Fewer, smaller combo | High, big streamers combine | | Termination Fee | $5B | $5.8B | | Political Factors | Strong support, Ellison/Kushner/Trump ties | Less clear support | | Employee Impact | More overlap/cuts likely | Still significant savings/cuts | | Timeline | Potentially close in 1 yr | Longer, more risk, less certain | | Funding | $54B debt, high yield risk | $59B bridge loan, strong credit |

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Conclusion

This episode unpacks the rapidly evolving bidding war for Warner Bros Discovery—spotlighting what makes Paramount/Skydance’s bid potentially easier to approve but more financially risky, why Netflix’s offer faces stiff antitrust headwinds, the likely toll on Warner Bros operations and employees, volatile implications for credit markets, and how politics may ultimately tip the scales. The episode closes with quick analysis of IBM’s push into AI infrastructure through the acquisition of Confluent.

Listeners are left with the sense that, whichever way the deal lands, it will reshape the entertainment and financial landscape for years to come.

Transcript

[Paul Sweeney]

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[Host/Producer]

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You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. You know, you wait five more minutes and there's going to be a new headline here on Paramount Skydance vs Netflix for Warner Brothers. But we know that this will be a deal that takes a long time to resolve.

[Paul Sweeney]

Know there are differences. You know the Paramount deal is all cash and it is for the entire company. So those two things make it much, much cleaner than the Netflix one, which includes 2775 in cash plus $4 per share in Netflix stock, which has historically been a great thing to own. But it's contingent upon the separation of the Warner Brothers separation of its cable.

[Host/Producer]

Networks, which was the plan all along.

[Paul Sweeney]

And all along and they've already done a lot of work on it. And then so the value. The value. Total value Seems pretty darn similar. It's just probably going to come down to who has a cleaner path to approval. And, you know, you could do that math. We talked to general, and it's. That math is pretty darn straightforward. But now we have the added uncertainty, which we historically have not had an M and A of, you know, this is becoming politicized, you know.

[Host/Producer]

Absolutely, because.

[Paul Sweeney]

So we'll see.

[Host/Producer]

Paramount, Skydance, controlled by David Ellison, son of Larry Ellison. The Ellisons have a very good relationship with President Trump, with the White House. And so they have made the argument implicitly or explicitly, that this deal has the President's blessing. So therefore it will go through more easily. Whereas we know that there's a lot of concern here about Netflix and its bid for Warner Brothers Discovery assets, not even the entire company here. And it all depends on how you define the streaming market, whether it includes YouTube or not. So there's a lot here to get through. Let's bring in Chris Palmieri, Bloomberg News senior editor and entertainment team leader on this deal. Chris, just give us a sense of what people in L A are saying, because most of these businesses take place in L A, maybe not as much as they once did. And I'm curious to get a sense of how the industry is thinking about it.

[Chris Palmieri]

I was having dinner Saturday night at a Thai restaurant with them family, and my, my daughter's friend who's 17, she goes, Netflix is buying Warner Brothers. I mean, this is just one of those things that just is shocking to everybody, but particularly to people that work in Hollywood. It's been a really tough few years. We've seen, you know, so much consolidation in the industry already and job losses and movies and TV shows being shot overseas and strikes and just the, you know, the promise of another big merger like this. It's just, you know, people are really unhappy and in shock.

[Paul Sweeney]

Chris, is there a feeling, it seems like if Paramount were to acquire Warner Brothers Discovery, there would be more overlap, therefore more jobs at risk. Is that, is that the correct way to think about it?

[Chris Palmieri]

Yes. Although, you know, both acquirers and Paramount and Warner Brothers are trying to downplay, you know, the job losses part of it. Netflix did say they looked at 2 to 3 billion dollars in annual savings, much of that basically in overhead, you know, redundant jobs and. But, but they were each trying to make. Make the case that their merger would be a little bit less worse, I guess you could say.

[Host/Producer]

Just a quick note here, we have a correction to make. The Bureau of Labor Statistics will now publish the October and November data together In January. I mean, the net effect is at the end of the day, Paul, all this data will come out after the Fed's.

[Paul Sweeney]

Hey, Chris, Paramount owns the Paramount movie and television studio. Warner Brothers owns the Warner Brothers studio. Is there. Can you put those two things together there from a regulatory perspective?

[Chris Palmieri]

Well, what they're doing is they both said, both Paramount and Netflix have said they want to kind of maintain the creative executives is working separately at Warner Brothers. Warner Brothers has had a phenomenal TV business. One of the issues for Netflix is that historically Netflix has produced just stuff for Netflix and. But they have said they, you know, will continue the policy of Warner Brothers making shows for other people, you know, and they, you know, have had a huge track record of that historically. So that's one of the things. Paramount also has said it would keep the Warner Brothers creative team together.

[Paul Sweeney]

All right. I'm not sure I believe that. I would argue just from my own perspective, Chris, I wonder what the folks in L A are thinking. This is kind of a more of a must have for Paramount. Skydance versus Netflix. It's a nice to have. Do you think that's accurate?

[Chris Palmieri]

Yeah, you know, I think if you just look at the public comments from the two Netflix Co CEOs, you know, Greg Peters was initially kind of dismissive of media mergers and was really throwing cold water on this idea. So I think that the idea that Netflix is that all in is. Is, you know, is definitely a legitimate one. You know, Paramount, I think, you know, Michael Moffat, Nathan said put out, you know, something over the weekend saying, and I think this is true, Netflix has been the winner historically. And so if you want to find a home, best home for your, you know, outstanding intellectual property, Batman, Harry Potter, Game of Thrones, on and on. You know, they're the ones that are going to get it all around the globe and invested in all that. Putting two struggling companies together is. It raises more issues. It's. Everyone always sort of seems to suggest that in almost any industry, but it doesn't always translate into outperformance.

[Host/Producer]

Chris, this deal, no matter who wins out, Netflix or Paramount, Skydance, will take a while to resolve. There's going to be legal challenges, there's going to be antitrust regulators looking into it. What does that mean that long lead time mean for Warner Brothers is ability to just do business and be the best performing studio it can be.

[Paul Sweeney]

In the meantime, it hurts it.

[Chris Palmieri]

I mean David's as I put it on a note last week, the CEO of Warner Brothers saying, everybody just focus on your work and Listen to your business leader. This isn't going to, this is going to take a while, but you don't even have to look very far or very long to find out. If you remember, you know, the challenges at AND T had when it bought Warner Brothers a few years ago. There was an extended, there was a lawsuit by the Justice Department. Really extended time to close that deal. You know, many people believe that it held the company back in terms of, you know, launching its own streaming service and, you know, investing in the business. You know, I don't see Warner Brothers core business helped by an extended regulatory review that really either Bit or Paramount or Netflix would face.

[Paul Sweeney]

Stay with us. More from Bloomberg Intelligence coming up after this.

What is actual investing? We believe that it's a real world task to deliver thoughtful capital deployment. It's not about speculating over the short term. It's about understanding the long term opportunities for companies through technological progress or new business models. So we seek out those exploring big new ideas that will change the world. Then we back them to give those ideas time to flourish. Bailey Gifford Actual Investors Find out [e-mail] support for the show comes from public.com you're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic option plays on the side. The point is, you're engaged with your investments and Public gets that. That's why they built an investing platform for those who take it seriously. On public, you can put together a multi asset portfolio for the long haul. Stocks, bonds, options, crypto. It's all there plus an industry leading 3.6% APY high yield cash account. Switch to the platform built for those who take investing seriously. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public Investing. All investing involves the risk of loss including loss of principal. Brokerage services for U.S. listed registered securities options and bonds in a self directed account are offered by Public Investing Inc. Member FINRA and SIPC Cryptotech trading provided by ZeroHash. Complete disclosures available at public.com disclosures introducing.

[Host/Producer]

The all new Adobe Acrobat Studio now with AI powered PDF spaces. Do more with PDFs than you ever thought possible. Need AI to turn 100 pages of market research into 5 insights with a click. Do that with Acrobat. Need templates for a sales proposal that'll close that deal? Do that with Acrobat. Need an AI specialist to tailor the tone of your market report to sound real smart in real time. Do that with the all new Adobe Acrobat Studio. Learn [e-mail] do that with Acrobat.

You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg business app Listen on demand wherever you get your podcasts or watch us live on YouTube.

[Paul Sweeney]

All right, the Warner brothers discovery deal just got a little bit hotter here today we have a over the top hostile bid from Paramount, Sky, Skydance, whatever they're called these days, that is for the entirety of the company. This is going to come down to regulatory hurdles. That's going to be one of the key, key issues. So for that we turn to January. She covers all the antitrust stuff here for Bloomberg Intelligence. Jen, does one potential buyer, Paramount, Skydance or Netflix, does one have a clearer path to regulatory approval?

[January (Jen) - Antitrust Expert]

I think absolutely. I think Paramount has a far clearer path to approval. I mean, if you just think about them in terms of the streaming overlap. And when I talk about streaming, I am talking about a narrow market for just streaming services and not a broader market that might include YouTube. They are much smaller than Netflix. And so when you combine HBO Max with Paramount plus versus combining HBO Max with Netflix, it creates far less of a problem. You know, and looking across at the creation of original scripted content, let's say that's a market that the Department of Justice looks at. Again, the combination is smaller than the combination of Netflix with Warner. And then you have the added cable channels. So Paramount has cable channels, Warner has cable channels. Netflix would not be buying those. So that is an issue that arises in the Paramount situation and not Netflix. But I do think if there's any problem there that's easily resolvable. So in my mind, Paramount's the better buyer from an antitrust perspective.

[Host/Producer]

I'm curious about the termination fees involved in this deal. Netflix says it'll pay a termination fee of $5.8 billion if the deal fails. That seems really large. Paramount Skydance offer includes a $5 billion termination fee. Just talk a little bit about the amounts involved there and what the fact that at least to me it seems pretty large says about what each side thinks of the possibility of this going through or not.

[January (Jen) - Antitrust Expert]

Relatively speaking, it's a very large termination fee. You know, you usually see these as 2% or 3% of the purchase price and Warner's had to do that when they negotiated this. I mean, there is a high risk, right, that a Netflix deal would ultimately not get done that they could get sued in court, that they could lose in court. It would break up. So they need to be protected because their business is just frozen for two years practically. And it does impact a seller's business, right, to kind of be in limbo that long. And that's what the termination fee is meant to do. Now, I think they have far less of a problem with Paramount, but you never know. And so I think to protect themselves, Warner would have wanted to work that in and Paramount wants to give that kind of insurance in case there's some problem there too now.

[Paul Sweeney]

Okay, so what are the next steps here? If I'm the board of Warner Brothers Discover, do I have to respond to this thing?

[January (Jen) - Antitrust Expert]

Well, Paramount, well, it's a hostile takeover. So they're going against the board's wishes. Basically, we know what the board wants. The board seems to prefer Netflix even with all the antitrust risk it brings. So now it's just going to depend on what happens here as they go forward and they solicit the shareholders.

I think this the deal that would get done more quickly and has assurance path would be the Paramount deal. So if Warner's interested in getting something closed within the next year, I think Paramount would be the company that they'd go with. I don't see them getting a Netflix deal closed in the next year.

[Host/Producer]

Let's talk about the politics part of this. Axios is reporting that Jared Kushner is helping to finance Paramount's bid for Warner Brothers discovery and that Axios is citing a regulatory filing on this Kushner financing bid to does that put it in a better position because Larry Ellison has a good relationship with President Trump. Jared Kushner, the president's son in law, is involved here even as Larry Ellison tells other media that if he feels that the deal was inherently biased towards Netflix.

[January (Jen) - Antitrust Expert]

Well, I would say if things were conventionally done, then it shouldn't, it should be all about antitrust. It should be the analysis, the economists and their assessment of the markets and the impact on the markets. But in, in today's day and age, there is an impact from politics. And the administration does seem to kind of micromanage these decisions. And so I think politics is a significant factor here, right next to antitrust. And one, from what you just told me and what we've read, it seems Paramount's the favored bidder by this administration as well.

[Paul Sweeney]

Stay with us. More from Bloomberg Intelligence coming up after this.

Support for the show comes from public.com you're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic option plays on the side. The point is you're engaged with your investments and Public gets that. That's why they built an investing platform for those who take it seriously. On Public you can put together a multi asset portfolio for the long haul. Stocks, bonds, options, crypto. It's all there plus an industry leading 3.6% APY high yield cash account. Switch to the platform built for those who take investing seriously. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public Investing. All investing involves the risk of loss, including loss of principal. Brokerage services for U.S. listed registered securities options and bonds in a self directed account are offered by Public Investing Inc. Member FINRA and SIPC Crypto trading provided by ZeroHash complete disclosures available at public.com.

[Host/Producer]

Disclosures introducing the all new Adobe Acrobat Studio now with AI powered PDF spaces. Do more with PDFs than you ever thought possible. Need AI to turn 100 pages of market research into 5 insights with a click. Do that with Acrobat. Need templates for a sales proposal that'll close that deal. Do that with Acrobat. Need an AI specialist to tailor the tone of your market report to sound real smart in real time. Do that with the all new Adobe Acrobat Studio. Learn [e-mail] do that with Acrobat.

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[Host/Producer]

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. One thing we didn't get to is the credit market. And of course we've seen yields. We've seen spreads really, really tight even as we've seen a lot more supply come into the market because of all the spending on AI. And there's going to be even more spending in 2026. So let's bring in right now Stephen Flynn. He's a senior credit analyst at Bloomberg Intelligence. And Stephen, we want to really dig into Netflix because as part of this bid for Warner Brothers Discovery, it's going to be getting a $59 billion bridge loan, the biggest investment grade BR loan in a while. And of course, that means eventually that will be replaced by corporate debt as well. How are you thinking about what kind of market impact that will have?

[Stephen Flynn]

Well, first of all, let's start off. Netflix is a very strong credit. So Netflix has a significant market cap. It's, you know, $425 billion or so. The company is growing revenue, growing EBITDA, growing free cash flow. Its net leverage ratio is very modest. Talking 0.4 turns of leverage, a company generates a ton of free cash flow. Netflix is a very strong credit. It's rated A3A. So they have the ability to borrow within that $50 billion that they have as acquisition debt. There's been reported that $25 billion will likely be bonds and the remainder will probably be a combination of term loans and maybe some other borrowing. While $25 billion sounds like a lot, if we think about Netflix bonds in the market right now, they're relatively scarce. If Netflix is part of communications, you think about borrowers like AT&T, Verizon, Comcast, T Mobile, those companies have huge debt loads and are large parts of the investment grade corporate bond index. Netflix is relatively small. So I think that there could be a lot of interest in Netflix bonds. I don't think it's a problem at all.

[Paul Sweeney]

And then the news of the day here. Paramount coming back over the top with a hostile bid for Warner Brothers Discovery. They're talking about $54 billion of debt commitments from bank of America, Citi and Apollo. So again, your market is going to have a lot to say about how this deal gets done, isn't it?

[Stephen Flynn]

Yeah. This is a completely different story. Right. So Netflix, sorry, Paramount, Skydance is on the edge of investment grade. So the investment grade by.

Moody's and Fitch, high yield by S and P, if you, you know, they're talking about the combined company could have about $100 billion of debt. So if we look at the debt loads at both Paramount Skydance and Warner Brothers, you're talking about an incremental $50 billion. Yes. They have a 54 billion DOL commitment. You're talking about pro forma net leverage over five times and that's including synergies. Right. So that's going to be much tougher. You're talking probably a good chunk of that will be high Yield. And that is a lot for the high yield market. Now, the high yield market is very strong. Issuance is up, yields are down. I think, you know, it's. The high yield market is very favorable. But this would probably be the biggest name in high yield. The biggest name in high yield right now is Charter. So Charter unsecured bonds are the biggest name. There's about $25 billion market value for Charter bonds in the Bloomberg High Yield Index, depending on how they set it up. But this could easily become, you know, the biggest name or close to it. So that makes it much tougher. Now, we have to see all the details.

[Chris Palmieri]

But.

[Paul Sweeney]

So if I'm a shareholder, Warner Brothers Discovery, a. The regulatory aspect, which Jennary just walked us through. But now I've got to sit there. If I'm an equity shoulder, do I want to be sitting there with a balance sheet of five times leverage?

[Stephen Flynn]

Well, if you're a Warner Brothers shareholder, you're getting cash. Right. So you could argue that you don't care. But if you're a Paramount shareholder. Yes. You have to be concerned that the pro forma company will have a significant amount of leverage. And that is a big name in high yield.

[Paul Sweeney]

Wow.

[Stephen Flynn]

But you do, you know, they also have big backers behind them. Right. Between the Ellison family and Redbird Capital.

[Paul Sweeney]

Paramount Skydance stock is up 5% today.

[Host/Producer]

Yeah, well, I mean, but this is not going to end anytime soon. This is going to drag on. So, Stephen, media companies being heavily indebted. What do we know about the appeal of this sector to investors? I mean, I think about Warner Brothers Discovery, when it came into being, it took on a lot of debt. David Zasov spent years trying to pare that down.

[Stephen Flynn]

Yeah. And he was unsuccessful. Right. The company was junked and they ended up doing a massive tender offer where they put in a lot of secured debt ahead of the existing bonds and then use that to tender for existing bonds at a discount to par. So bondholders really got hurt then. And then the company, you know, was junked. So it's been tough. When you think about communications in general, people feel a lot more comfort lending to more traditional communications companies like telecom, cable. You have hard assets. It's a little bit easier to lend to. It is a little bit tougher in media. So this would be a large name for media.

[Paul Sweeney]

Does Paramount have a view, Does a marketplace have a view on Paramount?

[Stephen Flynn]

Well, Paramount, it's not a very large name and it is on the cusp of ig. It trades very wide for ig, but that's because it's on the cusp and there's fears of certain deal like this. Now there's two sides, right? You have the positive of the Ellison family and Redbird coming in and saying, hey, there's support there. You know, I know we have somebody that's, that's backing us. Things can't get too bad. And the flip side, you know, the business is challenged and you know, there is a risk of high yield.

[Paul Sweeney]

I mean back in my day for this, this kind of deal in your high yield, I mean high yield market, five phone calls, I would, I would get a sense of whether this deal could get done. Is it still like that today?

[Stephen Flynn]

Yeah, sure, if you call the right people.

[Paul Sweeney]

That's right. And I knew the people to call and they would say, I don't think so, Paul. I don't think we can get this, you know.

[Host/Producer]

Well, speaking of the right people, Jared Kushner is part of this Paramount hostile deal bid for Warner Brothers Discovery through Affinity, the firm that he runs. So there's all kinds of political considerations as well. How do you anticipate.

Warner Brothers Discovery bonds to trade in the meantime? I mean, what does that look like?

[Stephen Flynn]

Well, they've been very volatile, right. So if we go back a couple of months ago when they got junked and there was the big tender offer, the bonds were crushed. They were charting and trading at large discounts to par. Then they've had a nice run over the last couple of months with all the speculation of being bought out. Now the Netflix deal happened and the existing bonds appear to be left behind with the global networks business which is somewhat deteriorating. So the bonds traded off a little bit on Friday. And then now coming in with having Ellison and Redbird behind you, that's giving a little bit more of a lift. But they're likely to remain very volatile.

[Paul Sweeney]

Stay with us. More from Bloomberg Intelligence coming up after this.

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[Stephen Flynn]

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[Host/Producer]

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch out us live on YouTube. IBM buying Confluent for $9.3 billion in cash, or $11 billion if you include debt on our Grana is Bloomberg Intelligence's technology analyst and he joins us now. So on Rock, what can you tell us about how this fits in with IBM's ambitions, in particular its AI ambitions, which it's really been repositioning its business around?

[Anurag (Technology Analyst)]

IBM's done a very good job since the acquisition of Red Hat. Not only did they pivot and move towards software, which is a much higher margin business, they actually have margin improvement because the gross margin of those businesses is very high. Since then they have bought a number of companies Hashicorp, Aptio, and now Confluent. The big thing what we want to think about over here is enterprises do not always go with either AWS or Microsoft. They do look at open source as a way of building their infrastructure. Confluent specializes in open source Streaming data platform, which is when you are looking at real time data, whether it is something that comes from a telemetric device or even transactions that are happening at a retailer or a bank, you can ingest that data directly into your system and then make sense out of it. Now that's going to be helpful as enterprises infuse more AI into their application. So strategically, smart move financially. Also a smart move.

[Paul Sweeney]

Red headline crossing the Bloomberg terminal. The BLS to not publish October PPI.

[Host/Producer]

Data, which I believe makes sense given that if I recall correctly, the BLS already told us that it's not publishing October jobs or CPI data either.

[Chris Palmieri]

Right.

[Paul Sweeney]

So that's kind of what we heard from a lot of economists. We'll talk to Mike McKee about that.

[Host/Producer]

Yes, absolutely.

[Paul Sweeney]

That's coming up.

[Stephen Flynn]

All right.

[Paul Sweeney]

IBM, this is, as a kid, IBM was technology that was the epitome of technology technology. Then the Internet came along and they kind of missed it. So you didn't think about them a whole lot. Now if you put up a stock chart over the last five years, the S&P has compounded at about 15% per year. IBM over that timeframe, 26% per year. Anurag, what is the turnaround of this aircraft carrier over the last five years?

[Anurag (Technology Analyst)]

As I said, I think it is the acquisition of Red Hat. I think the CEO has done a very good job of blending that particular, you could say operations within their services platform. Because when you think about the IBM priority that it was very services heavy, that's a business that has 40, 50 gross percent gross margin, not as profitable as software businesses. By being open, by going out and buying software businesses, their financial profile has changed, their cash flow has changed, and I think it's more stable in nature. They're still not at a point that their sales growth is going to be in double digits, but they are inching towards their target and it may be, you know, two to three years before they get there.

[Host/Producer]

So, Anurag, what's interesting about this particular acquisition is IBM is definitely making inroads or greater inroads into AI, but this is not a data center driven acquisition. What do you think that means in terms of the next stage of M and A that we're going to hear from the tech industry when it comes to taking advantage of opportunities in AI, but not necessarily buying AI data centers.

[Anurag (Technology Analyst)]

You see, everybody has their own strategy. What they are focusing on IBM, luckily, and it's good for them that they don't want to be in that, you know, a capital intensive, heavy data center. Business because this is a company that generates let's say 14, 15 billion in free cash flow. They can't go out and buy another, you know, expand into a data center space where the capital investments is multiples of that. They are doing the smart thing of buying software companies that are not capital intensive heavy. When you are going out and creating a new application, you know, the raw material, you need the raw materials to create or embed that. And that's where they are focused on and I think for what they do, it's a very smart place to be in.

[Host/Producer]

This is the Bloomberg Intelligence podcast available on Apple, Spotify and anywhere else you get. Your podcasts listen live each weekday 10am to noon Eastern on Bloomberg.com, the iHeartRadio app, TuneIn and the Bloomberg Business app. You can also watch us live Every weekday on YouTube and always on the Bloomberg terminal.

[Chris Palmieri]

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[Paul Sweeney]

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Janice Torres here and I'm Austin Hankwitz. We host the podcast Mind the Small Business Success Stories produced by Ruby Studio in partnership with Intuit QuickBooks. We're back for season four to talk to some incredible small business owners. The big thing about working at tech is that it's ever evolving, ever changing. Everyone's a rookie. That's how fast the industry is changing. So what I'm really excited about is to be part of that change. So listen on the iHeartRadio app, Apple Podcasts or wherever you get your podcasts.