John Rogers (2:04)

We're still finding ideas in the small value space. You know, they really have been ignored. They're kind of the ugly ducklings when you compare it to in video and Apple and all these giant, exciting growth stories, you know, the little mundane businesses that we've invested in for 42 years just seem, seem particularly orphaned these days. So we're seeing great ideas and excited to be doing the research. I think there's real opportunity for small value.

Bloomberg Host (2:31)

Do you see a broader future for investment in that sort of entertainment space? And I guess it's more, given what the sphere and MSG do, it is a little bit more of a hybrid entertainment space. But I am curious as to what additional value you find there.

John Rogers (2:47)

Well, everywhere we go, you know, we talk to as many experts as we can as part of our regular research and due diligence. And everyone is saying, you know, post Covid, it really is sticking that the next generation of citizens here, particularly in America, love experiences. They want to go out and be together to watch a ball game, watch a movie, go to a concert, go to an outdoor stadium to see music. It's something that is really, I think, here to stay. The momentum is continuing to hold. And so places like the sphere that have this, you know, magical ip, people want to come and experience it together. And I think it's really special. I think the wizard of Oz is just scratching the surface. It's absolutely amazing and exciting to go to, but there will be other exciting, amazing things. Everyone speculates, well, maybe one day, you know, it could be Star wars, maybe it could be Harry Potter. You never know what could be next. But those are the kind of things that people want to come in and appreciate in a live audience.

Bloomberg Host (3:47)

You're no stranger to investing in the entertainment space. And at least prior to the tie up with Paramount, Skydance, you were one of the largest shareholders in Paramount. Now that that deal is done, now that David Ellison has laid out his vision for what he wants to do with that company, I am curious as to whether you think that it can be not just profitable, but also a growth story again.

John Rogers (4:12)

Well, that's still an open question. You know, it's been a torturous experience. I still think for sure there's a lot of value there. You know, Paramount Studio is valuable. CBS is valuable. They're still number one year after year with their content. You look at all the different things. And of course, Paramount plus and Pluto, they have these extraordinary assets. And so the stock, I think is still, you know, significantly undervalued. Now, whether they can get the growth they hope to your question, that's, that's still an open question because you're, you know, you're competing with Netflix, you're competing with all the big guys, Apple and Amazon, etc. And whether you can Grow in that environment is something that's really still an open question. I think Mr. Ellison has the right idea of, you know, building scale, you know, building ip, making these acquisitions that can really add value and hopefully potentially add significant growth from revenue and profitability.

Bloomberg Host (5:08)

To that point on scale. Does a deal like one for Warner Brothers Discovery, should that actually come to fruition? Does that seem smart to you in terms of the cost and what it would actually bring to Paramount?

John Rogers (5:21)

Well, I've been reading an awful lot about it and talking again to as many experts as possible. I think that acquisition makes a lot of sense. It brings scale, as you suggest. It'll make them one of the major players that will be there forever. And at the same time, there's huge synergies, you know, huge cost cuts that are available. You have two major studios, maybe you could sell one of the studios and studio lot and all the real estate value that's there. But also just again, extraordinary amount of synergies that are there, extraordinary amount of cost cutting that's there. And we put it all together. I think there's this real potential of a merger like that would happen.

Bloomberg Host (5:59)

I do just have to ask you just about the political climate because that's sort of driving some of those divisions these days. And I know in the past you've said that you're still hopeful for America, so hopeful for our economy and our in our markets. But when you look at what's going on, particularly in the city where you sit, where Ariel sits in Chicago, which has been the subject of some of the ire out of the White House, what do you make of it?

John Rogers (6:25)

I just think it doesn't make any sense at all. You know, the city has never been more beautiful. It's never been, you know, the safety issues are drifting away, the violence is going down. You know, we've had extraordinary leaders here who've worked to build our city back from times where it was somewhat troubled. But we know Mayor Johnson's done a great job. JB Pritzker has done a great job. You know, former Secretary of Education Arne Duncan with his CRED program, the anti violence initiative have made a major difference. And our business community, our civic committee headed up by Derek Douglas, everyone's come together and we're fully on, on, on online, together. We have the same perspective that our city is really on the way back. Things are great.

Bloomberg Host (7:10)

We got additional headlines out of the White House with regards to tariffs, potentially more tariffs on China, largely because the president says that he doesn't think Xi Jinping is cooperating enough in the negotiations. Being a small and mid cap investor, particularly with some names that I would assume would have tariff exposure like Mattel. Does it give you a little bit of concern that we still have not sort of, I guess, reached some sort of resolution on where we're actually going with these tariffs, what they will be and what we can count on them to be?

John Rogers (7:42)

Well, none of us that work in the markets day to day like to see the volume. We don't like to see the volatility, we don't like to see the surprises. You know, we're looking for stability and this is kind of a fragile atmosphere with whatever's going on around the world, all the challenges we face. Having these challenges domestically around the tariffs is something I think is really problematic.

Bloomberg Host (8:05)

We've also seen a revival in dealmaking, John, that we didn't necessarily see definitely coming out of last year and at the start of this year. You are Ariel, and your funds are investors in names like Carlyle, Lazard and a few others. I am curious as to whether you think the current uptick that we've seen in deal making is actually going to continue and even potentially expand. Expand?

John Rogers (8:28)

I think it will continue and I think it will expand. As we've had a chance to talk to the management teams at both Carlyle and Lazard, you feel like the momentum is building. This regulatory environment is so much more friendlier for acquisitions and mergers. I was talking to a great leader yesterday of a big brokerage firm and they were just saying how this is going to be a great time for more and more deals to happen. I just can't overemphasize that. When you see the opportunities both for companies to make strategic acquisitions, that it's not going to be questioned by the Justice Department or the FCC or the other regulators are out there, the FTC and the rest. I think you're going to see one deal after another.

Bloomberg Host (9:14)

John Rogers, the co founder and chairman of Ariel Investments, a wide ranging conversation. His investments in the small and mid cap space, the state of the economy, the state of Chicago and the state of those trade tariffs.

Akshat Ratty (9:28)

There are two kinds of people in the world. People who think about climate change and people who are doing something about it. On the Zero podcast we talk to both kinds of people. People you've heard of, like Bill Gates.

Bloomberg Host (9:39)

I'm looking at what the world has.

John Rogers (9:41)

To do to get to zero.

Bloomberg Host (9:43)

Not using climate as a moral crusade.

Akshat Ratty (9:45)

And the creative minds you haven't heard of yet. It is serious stuff, but never doom and gloom. I am Akshat Ratty. Listen to Zero every Thursday from Bloomberg Podcasts on Apple, Spotify or anywhere else you get your podcasts.