Inside the Biggest M&A Deals You Need To Know (Glencore, Schroders, Paramount, Anthropic)

Hello and welcome back to the Market Maker podcast. And in this episode, it's going to be an M&A focus. So for any new listeners, we have kind of three streams of content really. M&A deep dives, which this one's going to be. Then we also have global markets wrap typically at the end of the week. Then we also get guest speakers. And as I said, I think if you listen to one of the recent episodes, I've just bagged the recording. With the Rogue Trader. I won't say his full name, but those in the know will know. Very famous, probably the most famous trader of a period of time in the late '90s. And that episode's going to drop very soon. So make sure you do like and subscribe to the channel. But in terms of this conversation, I'll give you a quick overview of the 5 stories we are going to touch on. So the first one comes by way of a request. We always listen. To our community. And so this one is about Santander and making a significant scale play in the US retail commercial banking sector with a $12.2 billion acquisition of Webster Bank. And certainly if you're in the UK, probably never heard of Webster Bank. So why are they doing that? We'll go through some of the rationale for that deal. And then Nuveen to acquire Schroders for $13.5 billion. That's pretty important. And the reason why is because this is a historical British kind of institution as far as Schroders is a name in the city, and they're going to form a combined value of assets under management of $2.5 trillion. So that's a lot of money. And then Rio Tinto, Glencore, they've abandoned their mega deal talks. Again, so we'll look at some of the complexities around that deal and why it keeps stumbling. And then also Paramount, they've sweetened their offer for Warner Brothers Discovery, and we'll look at some of the new creative ways of means they're trying to get that deal over the line and kind of wrestle it away from Netflix. And finally, Anthropic, they've raised $30 billion from investors as the AI group plans to a significant expansion of its data center footprint, and they're in preparation mode for their IPO. The new funding round gives Anthropic a $350 billion pre-money valuation. So as ever, joined by Piers to help me unpack a lot of these stories. And Piers, perhaps we could start with Santander.

Let's do it. Yeah, so they're snapping up Webster Financial. Yeah, this is an interesting one and actually we'll obviously go into a bit of detail here in a sec, but this is kind of just stepping back for a second. This is broadly part of the 5-year plan for Santander where they've been going about a kind of major, major kind of restructure and kind of from a strategy point of view, just really tearing up the old guard and kind of trying to move into the future. You might say that 5 years ago, Santander would, you'd have to describe them as a classic kind of multinational bank, whereas today they're trying to kind of rebrand and it's all about, you know, global digital platform layered over a universal banking license. So they're kind of, it's gone from, I guess, from a kind of geo geography kind of play to more like capability. For, so for example, instead of saying, right, you know, we're trying to, you know, the UK, Spain, and Brazil, okay. They were, they used to be their kind of core three kind of markets, I would say. And management would talk about, you know, those three territories, but now it's kind of more about products. And so it's more of a sort of global feel and it's more about payments and consumer finance and digital banking and kind of, they talk about global business lines rather than in the past they would talk about, right, you know, our presence in Brazil and our presence in Spain and so on. So bit of a shift there in terms of attitude and mindset. And then it's about deposits via digital and not branches. So look, this is obviously part of the evolution of the banking, retail banking world more broadly. I mean, particularly in the UK, I mean, people would've been very used to seeing Santander bank branches out on the high street. There was one in Balham, which is near where I live here in London, and there was one, you know, literally 2 minutes away from where I live, but that is now a Pret actually. So there you go. But they've closed a huge amount of branches, of course, as have all banks really. And so it's about moving more towards digital deposits, you know, rather than that physical stuff. And then it's like profitability. So rather than trying to build an empire and, right, we're going to take Brazil and all this kind of stuff, it's more about actually forget about that. It's like profitability. So targets are like 15 to 17% return on equity, for example. So look, this is part of a global sort of shift and a kind of restructuring and a modernizing. And so this is like the latest kind of big deal here. And actually one of the, you know, I'd say the underpinnings of this, and I'll quote Boutin, which is their CEO, who's basically saying that if one is not in the United States, one cannot aspire to be a global bank. And so she's saying, Europe needs global companies and banks, and for that we need to compete successfully in the US. So, this is part of that kind of vision, I guess. Now the problem is this path to the US. For trying to break America for European banks, you know, there are casualties littered left and right down that highway. So BNP Paribas, HSBC, BBVA, for example, in recent, like, decade, couple of last decades have been absolute car crash and have ended exiting all of their US kind of initiatives. Literally all of them. It's like saying, all right, wave the white flag, this isn't working, retreat. So, you know, Santander are really kind of bucking the trend of those attempts for European banks to kind of make that move. Of course, more broadly in this period, US banks have just come to absolutely dominate the planet. And all of these, you know, whenever we talk about M&A deals on this podcast and then we start rattling off the list of, right, you know, who are the lead players in terms of advisory activities and fees. And it's just always the big four US banks, isn't it? So, you know, they are kings. And so this is Santander's, you know, efforts, part of their efforts to kind of really, you know, step up and try and join these US players on a kind of more global level. So that's the kind of wider backdrop, this specific deal. $12.2 billion is the, is the valuation here. That's actually a 14% premium on the share price pre-deal announcement. So it's $75 a share. And if you go and have a look at their share price, I think they were trading around about 60-odd, just above 60 prior to this announcement. So it's obviously popped. Now we're trading at 71.50. So now pricing in the majority of that gap, not all of it, of course, that's because there's risk. You know, the deal might not actually complete. So that's why in the secondary market here, the Webster Financial share price hasn't just risen all the way to that 75 level. So that's just factoring in a bit of risk premium in terms of deal execution. But the way this is going to be structured is 65% cash and 35% stock mix. So it's interesting. So when you think about stock, and obviously a lot of these mergers or acquisitions, I should say in this case, involve stock. So you are buying a company by using your shares in your business. So that means the shareholders of Webster Financial, they're going to get 65% cash out and then the remaining 35% of the value of their ownership of Webster Bank, 35% of that will be swapped for shares in Santander. So here you've gotta look at actually, well, how the share prices of these businesses performed relatively speaking in recent years. And it's actually really interesting, you know, I just talked about Santander's strategy and it is working big time. If you go and have a look at their share price, because markets are loving it. And actually if you go back, I mean, if you go back to, well, the depths of COVID like, so the middle part of 2020, Santander's share price dropped to, actually it dropped below €1.50. Okay. Dropped below €1.50. It's obviously listed on the Spanish stock exchange here. It's a Spanish company, right? Below €1.50. It's now trading at €10.20. Wow. So this has been a turnaround and trading well, well, well above levels we've seen at any point in the last decade plus. So Santander are on an absolute tear here. And if you think about Webster Bank, if you go back to my comparison, Webster Bank had a bit of a peak in their sort of share price in 2018. Okay, so $65 in 2018. It's had a tough time of it since then, and it's only this deal announcement that's taken it above the 2018 high. But Santander's share price in 2018 Um, was less than half of where it is now. So my point is, over the last 5 years, Santander's share price has doubled. Webster Bank's gone nowhere. So from on a relative basis, you know, this means that the currency that is Santander shares has doubled in value relative to the Webster Bank shares, making this deal kind of cheaper in one sense from a kind of share price to share price comparison. So yeah, I mean, that's the backdrop. We've got 10x multiple here for Webster's 2028 consensus earnings. And look, from a strategic point of view, as I've kind of alluded to already, this is about Santander really stepping into that US market and trying to become a top 10 retail and commercial bank in the US. So the combined entity will hold about $327 billion in assets. And so this is kind of merging Santander's specialized consumer finance capabilities with Webster's more kind of strong commercial, and they've got a healthcare lending franchise in the Northeast, which is great from a kind of synergy point of view. But yeah, crucially, I guess the deal optimizes the funding profile. So bringing the pro forma net loan to deposit ratio Oh, hold on, hold on. Yeah.

Hold your hand. Sorry, can you repeat that?

Yeah. Well, the net loan deposit ratio. Yeah. Down to 100%. Okay. What the hell does that mean? So actually this is really interesting and part of Santander's, again, their kind of strategy. So that just means, right, as a bank, you know, how many, what was the value of the deposits you have? So your customers depositing money in their Santander bank account, right? What's the value of that versus the value of the loan, your loan book? Okay. And this is Santander, basically Webster Bank. One of the attractions here is they've got a really, really strong deposit base, high-quality deposit base, right? And so this means that Santander's purchase here is just kind of tipping the scales so that actually this is bringing up their deposits side relative to their loan book side. So it's, it's getting it to 100%. So previous to this deal, the deal hasn't happened yet, by the way. So at the moment, Santander's loan-to-deposit ratio is above 100. So it just means they're more risky because they're lending out more than actually ultimately what they have in deposits, right? So this is bringing it back to 100%, which is good, but as a comparison, Well, here's a question for you. If you take like the best bank on the planet, JP Morgan, what do you think their loan-to-deposit ratio is?

Sorry, go. So what are we looking at with the combined Santander and Webster again?

We're looking at, that'll bring Santander down to 100%.

I don't know.

It's a disappointing answer. 55%.

Yeah.

For JP Morgan, meaning they only loan, their loan book's only 55% of the value of their deposit base. And one, you know, and it's the best, that's the lowest loan-to-deposit ratio out of any of the big banks, right? They are an absolute powerhouse. On the deposit side, which just makes it so awesome. You know, they're just less leveraged and less risk, but still, you know, a monster organization. Anyway, Santander, you know, this is a good direction for their net loan-to-deposit ratio. So another reason for kind of doing the deal, that high-quality deposit base that Webster has. Yeah, I mean, other things, obviously with all of these big acquisitions, there's this cost synergy aspect. And so they've roughly estimated it'll drive about $800 million worth of cost synergies. You know, management remains focused on capital discipline, and this has been one of the aspects of Santander's sort of approach over the last 5 years. It's definitely been about dis— cost discipline more broadly. And so cost synergies, it's always a bit of a throwaway line and they come up with some magic huge number and the realities post-deal often don't, you know, you don't see all of that cost synergy. But I think with Santander, they've shown some really good discipline in recent years. So there's every reason to expect they can kind of find, you know, good high portion of that $800 million that they've kind of figured out on paper. Other stuff, leadership continuity. So this is a core component of the integration plan. So Christina Riley heads up the US part. So, you know, she's going to be US country head and then Webster's CEO, who's called John Kula. And actually this is where the CEO of Santander and John Kula, they met in 2023 at a kind of banking conference, I think in the US somewhere. Where they kind of first started to chat. So this kind of deal has been in conversation for a couple of years, but now all of a sudden it's actually begun to happen very fast. But yeah, John Kula, he's going to step in as CEO of the combined bank. So, you know, it's, this is a big move and we're expecting obviously a big transaction and these deals take a long time. So we're expecting this to close second half of 2026.

So makes a lot of sense then strategically here. So Santander, you said, you know, in my mind, I think of, it says a lot about me. I think of Take That, massive here, tries to go to America, isn't going to happen. But if they did a little collab with the Backstreet Boys, they could have made it, you know, so here it's kind of rather than try to come in as a European, very well-known bank into a foreign field. You go through this strategy of acquisition of a niche player, if you like, that's very domestic, US orientated, and then instantly you go from being somewhat unknown, although you, they do have a presence, of course, Santander in the US, to then a top 10 US bank, essentially in terms of gaining scale. And you said diversification of that deposit base.

Yeah.

So that puts you in the seat to kind of try to mix it up with the big boys. And I can see strategically Santander, you know, when I look at the hiring on the grad level, 'cause we obviously work in the early career space, they are aggressive in terms of manning up their workforce in the investment banking division, specifically in the US. And actually just looking at the leaderboards, I think last year they finished Santander, I think they're ranking, just having a look, they finished, well, they basically were quite a big leap up the league tables and that's been part of the strategy. So it's interesting from the advisory side of the bank and now looking here at much more of the kind of, you know, the bread and butter of traditional banking as they try to move in. So complementary, different diversification, lifting the whole organization up to be a truly global bank. So question then, is it hard because of the fact that this is cross-border? So not only are you trying to extract these synergies, but the problem is here you do have a, it feels like as you were describing, Santander has switched its orientation to being right, we need to change tack and stop focusing on some of those traditional markets, maybe Spain, Brazil, some of those South American, think more North America. Is that problematic though, particularly when you talk about someone like Webster Bank? Would there not be a, you know, just difficulties to extract those cost savings, hit those targets, do you think?

I mean, yeah, I would say it's, yeah, an alien market to what you are used to operating in. And so I think for sure cross-border deals are more difficult, you know, to bring these two organizations together and kind of find those cost synergies, as you said. I think definitely that is true. But look, I think the US banking sector more generally has been kind of ripe for a bit of consolidation. You know, you go back to the Silicon Valley Bank days, which, you know, is only a few years back, right? And we were really worried about just generally the whole banking system. I'm not talking about the big boys, but like the mid-tier to small-tier banks. And so, you know, I think this is just part of that story, albeit it's a kind of cross-border deal rather than consolidation within the US. But yeah, I mean, I think it's a good attractive play. I, one, you mentioned about the corporate investment banking side for Santander. So one of the reasons they've jumped up the league table is they they snuffled up the Credit Suisse teams when Credit Suisse went south. Santander were the ones who kind of stepped in quite aggressively and brought a lot of the Credit Suisse deal rainmakers across to Santander. So that's kind of what happened there. But yeah, I mean, I think this is a, it's an interesting play. It's a bold move. But it's about, yeah, Santander just kind of cementing themselves as a global universal bank. So whilst the Credit Suisse stuff, well, that's taking care of the investment bank growth. Well, this is definitely now the opposite end of the spectrum. This is the retail side. And so yeah, just trying to kind of broaden out that universal bank footprint more on a digital level with more of a global reach with a, you know, a kind of North America focus, which of course is the biggest market. Yeah.

And from a statistics perspective on that league table, I think Santander last year went from 2024 where they were ranked 23 in advisory fees. They finished last year at number 8.

Wow. Yeah.

So this year they're currently, we're only several weeks in, they're currently 10 at the moment, but early doors yet. On this deal, Centerview Partners actually is one of the lead names on this, followed by Goldman Sachs, Bank of America, usual suspects, as you said, and J.P. are advising on the Webster side. But Centivue Partners, another interesting one, they're currently clocking in at number 7 early this year. They finished last year actually number 6. So it's one of those where, yeah, a bit of a disruptor to the traditional names, like at the moment GS, JP, MS, Citi, BAML, all the top. Oh, I can't say BAML anymore. Apologies. Bank of America. I'll get told off by the Bank of America team if I don't say it right. Okay. All right, well, let's move on and talk about this other one because this only just came out probably 24 hours ago from when we're having this conversation. And when I saw it, I was like, whoa, that's quite, you know, it's not so much the ticket size, which we can go into. It was just the fact that, wow, there's a US firm going to acquire Schroders. That felt like quite groundbreaking news at the time because Schroders is such a such an institution, if you like. If certainly if you've lived life in the city here in London, it's always kind of been ever-present. So yeah, the headlines here, but perhaps we could get down into some of the, you know, the strategic rationale again. So what this is cross-border as well from a perspective of like what we were discussing with Santander. So maybe start with the mechanics of the terms of the deal. From a value perspective, and then we can go into some of the strategic stuff.

Yeah. All right. So the valuation is $13.5 billion from a dollars point of view, just clocking in. If you turn that to sterling, because Schroders obviously will be thinking domestic currency, so that's £9.9 billion. That's 612 pence per share. That puts it at a 34% premium over the closing price the day before this deal was announced. Announced. Excuse me. It's a multiple of 16.5 times on projected '26 earnings. And look, it's about, yeah, I guess this is the other way, right? We're just talking about Santander moving into the US. This is a US firm kind of trying to move into Europe. I forgot a point on the Santander one. So it's just quite an interesting thing about European banks and how they've outperformed from a share price point of view over the last 12 months, maneuvering them actually into a relatively, you know, better place to use their higher share price to kind of start acquiring, you know, across the Atlantic into the US. Anyway, this is kind of going the opposite way here. Yeah. And I, well, firstly, so, you know, obviously this is about geographical expansion for Nuveen. Who are predominantly based US-focused. In fact, 94% of its assets are kind of North America, or Americas, I should say. Right. So clearly this is them looking to try and maneuver outside of the Americas and acquiring an absolute institution here. And in fact, yeah, I mean, it's just interesting looking back at the history because Schroders are 222 years old, which is pretty remarkable. They were founded in, I've lost the year now, 1804, right? And I was just looking back at the history of kind of asset management and there's kind of broadly been three phases. So you had what was called the merchant banks and the kind of trust houses in the 1700s and 1800s. And so you would put BNY in there, Schroders, Northern Trust, for example, all founded like 200+ years ago. Then you kind of post-First World War, so '20s and '30s, you kind of moved into this kind of new world of what was described as mutual fund kind of pioneers. And you'd say there you like Capital Group, for example, that people might have heard of. And then you had what we have today, which is more that kind of, well, they call it post-Second World War, but 1940s onwards really, which is then about, you know, this is where your Fidelities and your Vanguards and so on kind of came in, you know, as new upstarts. And of course it's those new upstarts from back then, of course, that are now dominating the kind of global marketplace. 'Cause obviously with asset management, the key measure is assets under management. So you mentioned this would be a $2.5 trillion combined entity, which is, I mean, obviously you said is a lot of money, but is it a lot of money in the kind of asset management game? I think if they pull off this deal, it actually does get them as a combined entity. It does get them into the top 10, just kind of sneaky joint 9th, basically. Alongside Allianz. Okay. And actually maybe, well, I was going to say significantly from Schroder's point of view, but obviously this is then Nuveen, but it does take them above the biggest European asset manager. So just European asset managers. Do you know who that is?

Sorry, say that again. I was not doing very well on my quiz. I'm noticing your beautiful charts here over the, all your cogs and wheels.

Uh, uh, what is the biggest European asset manager?

Yeah, Amundi.

Correct. Yeah. All right. You, you're, you're back in, back in the game.

Come on, man.

Back in the game. Um, they're 11th, right? So this actually does take, but anyway, obviously Schroders would no longer be just a European bank combining with, uh, Nuveen. But anyway, it puts them into 9th, $2.5 trillion. So you kind of got that category. Like Goldman Sachs Asset Management, $3.1 trillion. UBS Asset Management, like $2.8 trillion. Capital Group, $2.8 trillion. Okay, so you kind of got that batch just above them. Then you go up to a batch between like $4 to $6 trillion. JP Morgan Asset Management, State Street, Fidelity. And then you got your big monster two that are way out ahead. So second is Vanguard at $10.1 trillion and BlackRock, of course, the largest clocking in. Well, it always shifts around, but currently $12.5 trillion. It's, I think it actually, didn't they get to $14 trillion? Maybe my stats are a little bit out of date here. I was going to say $12.5 trillion, but it is more than that. But look, you've always got the big two there at the top, BlackRock and then Vanguard.

So just, yeah, I was just having a look at one interesting thing that I haven't seen this before when, because typically what I do to surmise these deals when they break if I do a post or I put it in a newsletter, is I just go to the investor relations, see the press release, and there's normally a bunch of documents that the companies will put out. And they put out an infographic, which was unusual, and it kind of just was almost like an extraction of what is otherwise a much longer report into a graphical thing with some headlines. And some of the headlines were quite interesting here. One was, so Nuveen, when you break the $2.5 trillion down, like being based in London, you assume, well, Schroders is probably the bigger party here, but actually from an assets under management perspective, Schroders brings $824 billion, whereas Nuveen brings $1.4 trillion. And actually Nuveen is old as well. They were actually founded in 1898. And so you've got these two, 1804 and 1898. And interestingly, how they try to frame the positioning from a strategic and I guess strategic perspective is Schroders, they're sort of saying active asset management. So this legacy of responding to changing dynamics and intelligent investments, kind of clients helping achieve ambitions, these sorts of wording. Whereas on the Nuveen side, it's very much the first thing they say is wholly owned by one of the highest rated US insurance companies. And then they go on to list secure retirement outcome-focused investments for institutions as well as households and so on. Quite interesting how they position it as in, you know, from an asset management, it sounds like perspective from client types and investment outcomes, very complimentary is how they're trying to frame it, it would seem.

Yep. And that's actually, I mean, having lived and worked in Europe all of my life, even though I've been in the financial industry, I haven't really heard of Nuveen, to be quite honest. But obviously Schroders is a household name. I think if you took the equivalent of me in New York, it'd probably be the opposite where Nuveen's a household name, but ah, Schroders, haven't really heard of them. So, Of course, from a geographical synergy point of view, this obviously makes sense, but this is part of a kind of longer-term plan for Nuveen because actually they got acquired in 2014. They got acquired by the Teachers Insurance and Annuity Association of America. And part of that plan was, right, let's take this amazing, you know, North American institution and right, let's see if we can kind of use that as a platform to really start to grow globally. And so, this is part of that. I mean, it's taken them a while. Obviously there's been a few crises along the way, but now they're finally kind of making that plunge. I think from London's point of view, this is, you know what, this is another FTSE 100 company exiting the index and no longer being a London listed entity. So for like the London Stock Exchange and for like London as a kind of financial hub, Again, it's kind of this pattern has been in place for many years now, unfortunately, but it's another example of a big player exiting the FTSE, which—

Yeah, it's interesting because from technically speaking, that's correct. From a marketing brand perspective though, Nuveen intends to retain the Schroders brand, but I would say that that's very common. Given exactly what we've been describing, you know, it's such an institution that it would be very bad business sense to remove that. And they're going to maintain London as the combined group's largest office and non-US headquarters, which makes a lot of sense. One question then is, you know, you mentioned that list then of the assets under management, and obviously, you know, BlackRock is just just ginormous, and so is Vanguard and Fidelity and so forth. And the equity markets, let's just say the US, despite this geopolitical mess we appear to be in, we just go record highs, record highs. We have a little wobble and then we go back inevitably to record highs. So that kind of passive growth that you're seeing there.

Yeah.

Is this then value is with trying to combine to compete with that that domination of these passive giants by taking this more Schroeder's active approach and bolting it in? Is that part of the appeal for how you position yourself in the marketplace is that we can't get up to the levels, we're 2.5 trillion combined. You know, what is BlackRock these days? I mean, what are they, 14 or something? So we can't compete like that. But so you have to compete in a different way of why you'd invest your funds with us.

Yeah, it's right. And it's scale and then obviously cost synergies to generate, you know, more profits over those fees that you are charging your clients for an actively managed portfolio. You're charging a much higher fee than the BlackRocks of this world. you know, in terms of the fees they're charging on their ETFs and their passive funds, right? So even though you might have one-fifth of the assets under management, it doesn't mean your profitability is one-fifth of BlackRock because you've got a higher margin on your active, active managed sort of strategy. Also, you know, it's interesting what you say there. I think why are BlackRock and Vanguard like mega, mega way out ahead of everyone, I think because they're North American firms with passive, you know, huge volumes of passive funds. What's happened in the last certainly 15 years is the US stock markets, the US big stock indexes have just gone up big time relative to the rest of the world. And so if you are in the US with a, you know, heavily weighted North American bias and exposure in terms of your product mix, and those indices have just gone through the roof, then obviously naturally your assets under management is going to increase at a more rapid pace to asset managers not in the US with that kind of same domestic bias, right? So, but look, there's other things you could talk about here around is the passive, basically passive funds have outperformed active. And again, just maybe a function of this, the rise of the superscalers, you know, the big tech firms that have driven those stock indices just always perennially through the roof. You know, are we coming to the end of this? Are we at a major junction here? Because it used to be active managers would outperform passive. Now if you go back pre-financial crisis, right, then it's all swung in the last 10, 15 years. Passive has outperformed active, but People are beginning to talk, well, maybe that's going to flip back in the next decade. And so yeah, it'll be interesting because this positions this combined entity very nicely within that. If you put the league table of active managers, then actually they're kind of right up there.

Okay. So in summary then, this is like a scale play, as you said, trying to move into some of this active management as they look to scale against these big passive beasts. And then also you mentioned there briefly at the beginning of UK listed stocks just being ideal targets when they're trading at a discount relative to particularly the US. So not favorable for the City of London. But look, let's move on. There's some more to get through. And conscious of time. So let's talk about mega mergers now. So we're kind of stepping up the price tags a little bit and this one's an ongoing saga that seems to be never-ending and doesn't seem to really be moving a great deal. Rio Tinto and Glencore, they've terminated discussions last week regarding a potential merger. This would've created the world's largest mining company. So market value exceeding 200 billion. So we're not talking the 9.9 sterling or what was it, 12 billion on the Santander deal. We are talking 200 billion plus. This goes back, like, this is a long story. So it was in January 2026 when Rio and Glencore confirmed they'd entered talks. This isn't all, or perhaps you could explain this thing because you talked about it at the beginning about the composition of the offer. And about Santander's stock price appreciation and so therefore the attractiveness of having that as a useful asset to then incentivize someone that, look, we're on a really positive trajectory. With Rio and Glencore, they're entering talks. It's an all-share deal. So I'm assuming there's then increased risk when there's no cash component within this. I don't know if you've got charts there, but I'd like to know what Rio and Glencore's performance have been over recent periods.

Well, yeah, I mean, risk in terms of whether the deal can get agreed. I mean, there's obviously less, a lot less risk from a kind of financing and structuring the deal. You don't have to raise any finance, right? So there's less risk there. But if you look at the two share prices, both have done actually pretty well. Let's say, you know, if you look over the last sort of 12, 6 to 12 months, both have actually been appreciating quite nicely. And in fact, Rio has kind of spiked to break the kind of 2023 highs. So actually Rio Tinto snuck above 7,000 on the FTSE for the first time in a long, long time. Multi, multi, multi-year highs here. Obviously the commodity space has been outperforming kind of broadly because commodity prices have been on a bit of a tear. Glencore, not so. So they're still below their— well, they had a bit of a 2022 peak at $555. They're trading at $491 at the moment. So definitely Rio's share price has probably, certainly in the last 6 months, has just marginally outperformed Glencore. But look, these two have been talking for 12 years. This is like the dullest, you know, latest episode in a saga of just, uh, we can't agree terms, let's just go our separate ways. And then, then they come back. So in 2014, they were talking and it failed. 2024, they were talking, it failed. 2026, they were talking. Dunno, is it going to fail? I mean, yes, So I think that's it. If it's an all-share deal, then ultimately depends what each person's share price has done as to when they return back to the table, whether they feel like they're getting good value or not. So I think from that respect, you are right.

Yeah. So as you said, metals are going up. So both shares, little bit of different in pace. Rio may be outperforming, but have been going up. Copper is what's really the center kind of story here of why this is such an interesting one. And the other part of this is the consolidation that's been happening in the sector, which is notably BHB Group. They made several unsuccessful attempts to acquire Anglo American over the last 2 years. Yeah, we'll come back to that. But this again just goes to ratify this idea that it's so challenging to try and get these mega mergers over the line in many different ways. Meanwhile, Anglo American, they did successfully reach that agreement to merge with Canada's Teck Resources. That was one of the biggest deals. Of last year. And that transaction followed Glencore's own acquisition of Tex, still making coal business in 2024. So yeah, definitely it's almost like if you're not coming together, you're going to fall behind because these ever bigger entities are combining at this point. I guess one of the questions here is, well, why has it fallen apart? The primary hurdle here is a failure to reach consensus on key key terms, the obvious ones, the valuation, the ownership split, and the leadership structure of the combined entity. I mean, they're probably like your three pillars, aren't they, of where the deal's going to fall over. So doesn't feel like this is going to go through anytime soon. I think there was the ratio split that I was looking at was that Glencore sought that the deal would have granted its shareholders approximately 40% of the combined company. And Rio rejecting that. They reportedly looking for a ratio close to 62:38. And you think, well, what's that margin? But then look, this is a $200 billion plus entity that's meaningful when it comes to that sort of level. And also Glencore executives, you know, Glencore, although underperformed, they do hold a really key asset in the current global context of particularly with AI. Race that's happening, which is their copper portfolio, which they're always, I mean, in, you know, as you would do, you're going to sell it in the framing of, well, look, this is a really undervalued asset here. This is worth a lot more than what you are saying. Look, just look what's happening. And this gravy train of AI is going to continue. Look at the CapEx of the big tech. They can continue to demand the growth of data centers and chips and so forth. So, Yeah. What this does mean then is that under UK takeover rules, Rio is now barred from restarting talks or making a fresh offer for Glencore for at least 6 months. However, right, I think I can go back in our back catalog of episodes and every 6 months they pretty much come back to the table and they go and talk and flirt and fail in a repeated cycle. So, Yeah. Interested to see how further forward this goes. There's some expectations. Analysts are saying that Glencore's likely to shift now toward internal portfolio reshaping and asset disposals. So it seems sensible then with Glencore to just double down on its, those strengths in its copper division. That's the most attractive part of its business. And then analysts also suggesting Glencore may sell off other individual assets, just again, more concentrated into the higher multiple copper and its trading entity as well. So with this one, I think probably summarized, and I did see a really good stat here, is, you know, why do these mega mergers take place? Well, in the mining industry, you might think, okay, so natural resource deposited in like copper and you think Chile, You're like, okay, it's kind of like when people had the assumptions when the US intervened in Venezuela, it's like, yeah, go in, grab the oil. Such massive monumental oil reserves. This is going to be great. The only thing here is when you talk about mining, how many years do you think it takes to bring a new copper discovery? So finding it, then into production. How long do you think that period is?

10 years.

You're 7 short. So 17 years.

Oh wow.

Okay.

I thought I was being punchy with 10. Okay. 17 years.

Yeah. So it takes almost 2 decades. So hence the reason why Glencore are holding onto this like high valuation of copper. Hence the reason why they want to double down in that area because of the direction of travel of technology and its its influence within that supply chain. And then also why Rio is so desperate to get his hands on it and combine entities. So the other thing though is obviously the complexity. So I think with this deal, it's a very common one where there's a lot of strategic rationale, but it collapses because of extreme complexities, cultural differences, regulatory constraints. Tax burdens. And also one of the biggest things that's probably why this deal's not going to happen anytime soon, even when the 6-month stock clock goes off again, is heightened geopolitical risks. Because if you think about critical minerals in the macro context of 2026, these are now national security priorities.

Yeah.

Where it's almost like a battleground who owns copper. So when you try and think of these cross-border deals now, of a strategic asset, like what is fundamental to picks and shovels to make the AI dream come true. It's hard, you would think.

Good luck with that.

Yeah, exactly. So, but again, I mean, that's only, I would imagine, going to get worse as the years go by. So if you've got to get it done now, so yeah, you know, do you change the terms of the deal and do you give up that 2% at the table?

Well, this is it. This is it. This is where stubborn ego and pride probably just get in the way of doing— you've got to see the long-term value. Yeah. A couple of percent giving up now just to secure this long-term strategic play is probably worth it. But there's a lot of ego that gets in the way of that.

Yeah. Commodity trading houses. If you read it, if you know the history of them, there's, there's a few little egos flying around. All right. So this one's a bit more of an update rather than a particular deep dive, but there was a point of terminology that I wanted to cover. And this one is Paramount Skydance have enhanced its hostile bid for Warner Brothers Discovery. So this is another one that keeps rolling on. Important things to take away here were that the headline per share offer is untouched. So it's basically still at $30, or that would equate to $108.4 billion including debt. The thing to take away now, and I like to think of it as in, okay, so this is the price tag and underneath the price tag there's levers and you can change the composition of the levers to try and make then the price tag look more favorable for the person who's being acquired. In terms of satisfying their board. So a couple of things here. The first one is called a ticking fee, and I'd never actually come across this before this week. So that's the main takeaway point from this discussion. So Paramount introduced a ticking fee of $0.25 per share. What this means then, they would be paid to Warner Bros. Discovery shareholders for every quarter the deal remains unclosed. After the end of this year, starting January 2027. So what they're saying here essentially is we'll commit to conclude this deal by the end of 2026. If we roll into the, this time next year, for every quarter thereafter, we'll pay 25 cents on the share. That equates to, given the, the size of the deal, approximately $650 million in cash. Per quarter we will guarantee you if we continue to go over that deadline. So that's called a ticking fee, which again is like one of these incentives to bring to the table without alteration of the headline kind of value.

Yeah. And remember Netflix, see the board of WBD, Warner Brothers Discovery, have agreed terms with Netflix. right? And that is for an $82.7 billion deal. But Warner Bros. Discovery, they have to kind of break up because Netflix only wanna buy the studio and the streaming assets, right? So it comes, it's a complex sit. So Warner Bros. are gonna have to go through that sort of divestiture and then sell to Netflix, and it's gonna take a long time, and there's a huge regulatory risk around Netflix, the dominant player in the streaming world, you know, buying another big chunk of that world. You know, is there antitrust? There's antitrust risk there. So here, Paramount are coming in over the top of the board, going straight to the shareholders. Hostile takeover. We'll pay you more money, $108 billion, but we'll buy the whole lot. You don't have to divest anything. We'll just take everything as it is now and we'll get a quick deal done. And look, we'll prove it with this ticking fee. So we are going to get this deal done in 2026. So the, yeah, it's just trying to talk to the shareholder, the individuals, and try and wrap up this deal with as many bows as possible so that they can steal this from Netflix.

So if you thought that was a good deal, it gets even better though in terms of what Paramount are offering. So in addition to the ticking fee, there's 4 other elements now behind the scenes that they're trying to do to just sweeten it. The next one is the breakup fee. So Paramount has committed to fund the $2.8 billion termination fee that Warner Brothers would owe Netflix. So they're basically saying, look, you don't need to pay the $3 billion, you just drop them. Because normally that, that $2.8 exists to stop the very thing of breaking up the deal because you're going to just be hit with that massive bill. We'll, we'll, we'll take care of the, the check. If it's delayed, we'll pay you $650 million. The next one is to address concerns regarding Warner Brothers' planned debt exchange. Paramount have offered to fully reimburse a potential $1.5 billion fee owed to bondholders. They've also already gone to regulators and they've received certified compliance with the US DOJ on their second request. Requests regarding antitrust investigations. They've had foreign investment clearance in Germany. They're discussing it with the EU and the UK already. And the final thing is just to round it all off, uh, for, for certainty issues, personal guarantee from Oracle co-founder Larry Ellison has increased again. So, jeez, they, they are going. Guns here for to—

So Larry Ellison being the father of the guy who runs Paramount. Yeah, exactly. So it's kind of an Ellison family thing. This is extraordinary. I mean, I don't know, I, I've never seen so many sweeteners being added. It's, it's very clever. I mean, look, it's, it's a lot of very clever kind of sweeteners add-ons here. It's just gonna be really interesting. Whether the shareholders of Warner Brothers Discovery actually trump the board here. And it's just, it's just really, this is a really interesting story that's going to keep giving as we go through 2026.

Right. And in classic kind of Netflix style here, because this will certainly probably be a series whether they win or lose this. So the focus next, so the next kind of probably pivot in this story. There's kind of two dates to be aware of. There's a special investor meeting expected by April where the Warner Brothers Discovery shareholders will vote on the Netflix deal. So that's in April. Paramount has extended its own tender offer deadline to Feb 20th to continue lobbying investors. So those two dates. So overall, this then is about using these different incentives. So I guess what we're trying to say for students thinking about M&A is don't just think about M&A in its traditional sense, like the financial valuation methods that you use, that you typically as your starting point when you learn about M&A, that's kind of like the technical part. This is all about strategy now and what are all the other secondary financial instruments that you can engineer such as sweetening to all cash offers, covering breakup fees, debt exchanges, ticking fees. There's more out there that they can probably do as well. So yeah, a good one just to sort of think about all these other elements. And certainly if you had an interview, this would be a great one because I can almost guarantee you there will be no one talking about those other elements. Everyone will just talk about the financial synergies, for example. They won't necessarily start talking about the macro context. If we were talking about the mega mining mergers and the regulatory side, and on this one it's more about these other financial instruments that can be deployed to help get a deal over the line. So these are really good tactical ways if you're a student interviewing to demonstrate depth of knowledge that none of your peers will probably be doing. All right. Final one though. You did slip in here Anthropic.

Yeah.

Very quickly. What's the deal here?

This is a quick one because this is just so Anthropic are raising $30 billion. We talked about this a lot about how Anthropic and OpenAI are trying to compete with Google and Meta and therefore from a funding point of view, 'cause if you're in this race and you've gotta build a load of data centers and spend an absolute fortune on data centers and you're not generating much revenue, 'cause Anthropic's revenue is, well, run rate revenue is $14 billion, right? But this $30 billion raise here values them at $350 billion pre-money, right? But of course their cash burn, we talked about this with xAI and the the SpaceX deal last week, the cash burn of Anthropic and OpenAI and xAI is just ridiculous, you know, billions a month. And so to keep this race going, they've gotta continually be raising and raising and raising. They can't, you know, Google, well, they've got a money printing machine in their kind of, you know, search business, which funds it all for them, right? So these big hyperscalers got such a massive advantage here. But anyway, this is Anthropic's latest kind of attempt to kind of stay funded. So $30 billion and you've got GIC, you've got Kochu, you've got Founders Fund, you've got NVIDIA in the mix here in terms of who's going to be getting involved with this funding raise. And look, this is all part of then ahead of what we're expecting to be an IPO later this year, right? So it's like, well, I've got to raise $30 billion now just to get to my IPO in 6 months' time where, and then I'm going to raise more. It's just, yeah, it's insane really. And then just that circular nature, because actually this $30 billion, a portion of it, I don't know how this quite works to be honest, but a portion of this funding round includes $15 billion committed by Microsoft and Nvidia last year.

How does that even happen? I mean, Jensen Huang is so good at cozying up. And playing the game. I mean, genius.

Yeah. Diversify. You gotta get, you gotta get your piece in each pie. But look, I mean, look, obviously Anthropic are on the, on a real tear here. They're dominating that sort of corporate space, the launch of Claude Code. I mean, this is an insane stat. The subscribers to Claude Code has quadrupled just this year. We're only, we're only 6 weeks into the year and it's quadrupled their subscribers. And apparently now they've got more than 500 corporate customers that are spending over $1 million a year each. So obviously Anthropic are really having a really good phase in this race. They've had a really good boost. So I guess they're kind of just tapping markets for more debt off the back of this momentum that they've got, which of course helps to reduce the cost of that debt because the demand for it's going to be higher. But yeah, the circular nature of all of this comes back to the spotlight with Microsoft and Nvidia buying slices of this. And then you've got also OpenAI are in talks for a new round. They're IPOing in 6 months as well. Yet they're looking to do a round of $100 billion now. They're IPOing in 6 months. It's just insane. The capital raise required by these guys who don't have a cash printing machine to stay in this race. It's just going to be really interesting who makes it in 5, 10 years' time because they are betting. They're not only betting the house, they're betting all their mates' houses, all their mates' mates' houses. And yeah, I mean, they are all in. Nothing could go wrong. Yeah.

Well, I mean, that being said then, that exact summary, is that not why Google wins in the end?

Well, if you're a betting man, I mean, yeah, the low-risk bet is obviously your Googles. But then if you go high risk and one of these lot pulls it off, if Anthropic makes it through, if OpenAI makes it through, through, then fine, you're going to get much greater returns. But even these guys are valued ridiculously, $350 billion valuation for Anthropic off of $14 billion revenue. I mean, so a lot of that future crazy upside, if they make it, it's kind of already baked into the price. So yeah, we'll see.

What's it, what's interesting is, do you remember, I think it was 2014, how much Google paid to acquire DeepMind and the DeepMind team, which are obviously core to the AI ambitions of Google. Because I'm just putting it in context. So we're talking $350 billion for Anthropic, but what do you think Google paid for DeepMind?

What year was that? Sorry.

I think it was 2014.

I think it was only a single-digit billions, wasn't it?

Less than that.

Oh, go on.

400 mil.

Oh, wow.

400 million. What a trade.

Well, it's a trade. It's a great trade now. You, you gotta understand back then.

Yeah.

DeepMind's revenues, basically zero.

Yeah. Yeah. But zero.

And no, and no, and no product roadmap.

But I get that. And so there's been a long payoff. To wait. However, again, isn't that why Google wins? Because they can afford to take these moonshot bets or projects and they can wait for 10 years. What you've described to me is these businesses can't wait 2 months, never mind 10 years. Yeah, 100%. But interestingly, the reason why I, because I saw the documentary on this and you can access it on YouTube, obviously for free. It's a really good one about DeepMind. And the reason why he did it, the founders of DeepMind took the deal even though they knew they were valued higher than $400 million, is that because they're such purists and they wanted to achieve a lot of their research goals, they just needed the compute power. And so they were willing to sacrifice then. I mean, his point being that, you know, that's more than enough money. I want to hit these goals. And obviously the, the guy, I can't remember his name, but he went on to become a Nobel Prize winner, a science winner. 'Cause he, you know, he did the, what was it? The fold, protein folds.

Protein folds.

Yeah.

Yeah.

Maybe that's another one for your science lessons that you normally dish out on these podcast episodes. Protein folds next time, please, Piers.

We'll do a deep dive. Let's go next time. Better do some research. Yeah.

Google, Google, Gemini, tell me about, All right. Thank you everyone for listening. Slightly longer episode, so please forgive us. We think we've hit the hour mark. We'll try harder next time to shorten this, but as ever, do stay tuned. And later on this week, I do have an episode for anyone who's interested, I think just generally in getting a job, but certainly if it's in investment banking, I interviewed a student who just has such a great mindset. And strategic approach to how he basically went from a council estate in Bow, and now he's an investment banker at Deutsche Bank. So it's such a phenomenal story where it's not just about social mobility because everyone could adopt his mindset and tactics, whomever you are. And he's really good at breaking it down strategically, all the good stuff that's really going to move the dial, I think, for a lot of people to get the jobs they aspire to get. So Look out for that. It'll come out in a few days' time later on this week. But thanks very much, Piers. Have a good week.

Take care.