Inside the Biggest M&A Deals You Need to Know (BlackRock, Toyota Industries, Pinterest, Paramount)

Hello and welcome back to the M&A segment of the Market Maker podcast, where I'm joined by Piers Curran to talk over 5 stories from last week. And to give you a bit of a flavor of the conversation coming, we have MTN. Some of you might have heard of them. Most of you probably haven't. They are Africa's largest mobile network operator, and they're moving to take full control of IHS Towers, taking the tower giant private. In a cash deal built around ownership, cost control, and rollout flexibility. There's two stories here. First one of Elliott investor or activist investor Elliott Investment Management. They've accepted a revised bid for Toyota Industries that values it at nearly $40 billion. Lots to unpack there, in particular around how things operate with some of these big conglomerates in Japan and the focus on governance and capital efficiencies and so forth. The other one with Elliott is they're investing $1 billion in Pinterest through convertibles. That's a hybrid financial instrument combining debt and equity features with some of the proceeds tied directly to accelerating share repurchases and capital return. Then the final two, private equity. BlackRock and the Swedish PE firm EQT Led Group have agreed to acquire AES in a $33.4 billion deal. Much the recurring theme, of course, driven by surging data center power demand. And also quite an interesting angle on the flexibility of being private, which we have talked about before a little bit about the how onerous it is once you become a public entity. And you can also have a look at that. And then the final one, one you'll be very familiar with. It's probably been the most recurring topic on this show for some time. And that is that Netflix have refused to raise its bid. Paramount's revised offer has won. So a rare bidding war outcome that we've seen that has actually led to both names, Paramount and Netflix shares going up quite sharply, which is actually quite unusual. So we'll also have a look at that as well. So we'll start off with MTN Group. So as I said, Africa's largest mobile network operator. So they've agreed to buy roughly a 75% stake in IHS Holding that it does not already own. And this transaction in terms from a size perspective is around $6.2 billion. So I guess first thing is, who is IHS?

Yep. And actually, can we just say this was a, uh, a viewer request.

Hmm.

This one, by the way. So look, just proof that we do actually listen and, and read comments and occasionally act on a request and here we go. But yeah, this is a kind of, you know, this is deep in African infrastructure. And so IHS, well, they own towers and this is like telecommunication towers. And yeah, I mean, these businesses, they are not small. I mean, this transaction, so remember this is MTM Group buying, basically buying back about 75% stake. It already owns a chunk, obviously, but this values them at $6.2 billion. So it's quite, yeah, it's just interesting with the whole African infrastructure play. You know, it's, I mean, it's been massive for years, but you don't often hear deal flow, or maybe not, let's say in kind of up here in in, in kind of good old United Kingdom. We don't often hear of deal flow going on in Africa. So this is quite an interesting one. But yeah, they're one of the world's largest tower companies. So they've got 29,000 high-quality towers in Africa. And so serving various stuff, mobile network operators and yeah. And so in the, in the, they operate in the 5 key markets that MTN are operating in. So the deal returns MTN to direct ownership. I guess this is one of the key points here. So obviously they're going to retain, you know, regain ownership of all of these towers that it originally built. So MTN built all of this infrastructure, then flogged it all to IHS, and basically now they're buying it back. So it's kind of come full circle.

So I guess strategically then, yeah, this is looking at a reversal of what had been a bit of a decade-long pattern, which would've been practical business sense to outsource tower leasing. But now it's coming back to bringing those tower ownerships back in-house fully. If you have control of that, then you can position your way to cut long-term rental costs, I'm assuming.

Yeah, I think—

give some degree of, you know, if you're talking about, you mentioned there Africa and infrastructure, it's kind of like that untapped continent, which has such phenomenal potential. Obviously a lot of money would need to be involved, but these are the big players within that space. And so if you have full control, well then you've probably got greater flexibility as the nation becomes more affluent. Then future-proofing for 5G fiber optical rollout, all these sorts of things. I mean, it's so underdeveloped. Yeah. There's such a big opportunity there, and I guess it makes sense in that way.

Yeah. And I think it's also a good example of growing businesses trying to find clever ways of accessing capital to accelerate growth. So here, like a decade or two ago, they're kind of leasing out or even selling some of these towers, obviously to raise capital for then growing their core business. But That's been such a successful strategy execution that actually now they're able to start to buy back some of these key core assets ready for then, I guess, the next evolution of their business growth out over the next decade. So yeah, positive, real success story, I would say, from NTN's point of view and their CEO, Ralph Mupita, or Mupita, obviously pronounced that horribly wrong, but yeah, he's doing a good job, clearly.

Yeah. So in summary then, the key takeaways from the themes here for anyone kind of diving in or learning about this stuff is the bringing towers back in-house, showing ownership can become strategically valuable when it reduces long-term structural costs. And then as you mentioned, Management's tighter control, and a very key word there you said was execution. So network execution. So that's quite a high-level shift towards selective ownership of must-have infrastructure when it directly impacts competitiveness. Then the other thing being closing liquidity guardrails, so minimum cash condition, helping to lock in intended funding mix by ensuring the target contributes the balance sheet cash assumed in the deal.

Yeah.

So this is where it starts to get a little bit more financially motivated in terms of the actions that they're taking, I guess.

Yeah. And this is it, like that balance sheet point is quite an interesting one where, I mean, obviously when you're buying or acquiring any kind of business, you obviously need to finance that and these Deals are often super huge and there isn't enough cash lying about, so you've got to come up with ways of obviously borrowing money, right? In various different ways. Obviously there's a cost to that borrowing. Here, actually, they're taking a billion dollars of cash that's sat on the IHS balance sheet, and actually that becomes part of the kind of funding source, obviously, you know, to IHS's benefit here because Obviously, you know, MTM are paying for that cash, but that cash is not being left in the business for IHS to operate. And, you know, from a working capital point of view, I think they've agreed that, I've lost the figure now, but I think it was something like 300-odd million was the amount of working capital that both parties, 355 million. Was the amount of working capital both parties agreed would stay as a minimum cash balance on the IHS balance sheet for operations post-deal. But actually the rest, that leaves a billion that actually can come in and actually provide a cheap, it's basically cheap funding because you don't actually have to borrow it if you see what I'm saying. Also, maybe final point for me at least on this one is, you know, we've been talking about this AI sort of proof business model. You know, some, you know, big theme over the last few month or months, but also weeks has been capital intensive sort of businesses have been quite attractive as being quite AI proof. And this is a great example of MTN, but you know, you can't, AI you can't AI infrastructure, right? Or at least not yet. We're going to have to wait for Elon Musk to build his robots and maybe then you could send your robots out and build a load of towers. But look, that's a way off, right? So this kind of hardcore physical infrastructure asset has actually become an even more attractive and valuable thing in this kind of AI revolution that we're in.

Cool. And just to conclude on this one then, JP Morgan was acting as the financial advisor to IHS Towers, Bank of America, and Citi acting on the side of MTN. And we'll get through a few of these and then I'll give you the latest scorecard on the M&A fees at the moment. There's some, there's some movers and shakers.

Oh yeah.

Pretty, pretty much, uh, as you would expect at the top. But in the middle, there's a little bit of jostling. It's like, it's like looking at the Premier League table.

Mm-hmm.

You might have like Brentford or somewhere sitting in 6th place going, hang about, what's happened there?

Yeah. Who's the Tottenham of the M&A league table? Let's not talk about that. Yeah. Is that league tables just for this year to date? Are you talking?

Yes.

Okay. I'll be, I'm interested. All right.

Let's leave that to the end. Stick around. I do need you for a little bit more.

Ah, okay.

Well, let's talk about this next one then. And this is one I know you had some interesting facts about, and this was about Elliott Investment Management. Agreed to a sweetened bid for Toyota Industries, clearing a key hurdle for the Japanese forklift maker to be taken private. But one of the first things that you said to me was about maybe a bit of history about the company perhaps, and then the ownership and Elliott themselves could be—

Well, I mean, Elliott Investment Management, that kind of in the headline of this deal, which is interesting, right? Because they actually only own 7% of Toyota Industries, and yet it's almost like they're positioned as the key kind of player in this deal actually going through. So this is Elliott selling their 7% stake, right? For a sweetened bid. And the point here is it's Toyota Industries, I mean, well, like there's these big Japanese kind of mega behemoth conglomerate businesses, right? Toyota being definitely one and famous ones like Mitsubishi, for example, or Sumitomo or Mitsui, right? These are just monster-sized conglomerates. And basically this is what is termed as the Kiretsu kind of Japanese sort of method, and it kind of came out of post-Second World War actually. And basically Kiretsu is groups of Japanese companies that are linked through cross-shareholdings and long-term business relationships, you know, all very incestuous. This is where companies within the group own shares in each other and essentially therefore create this quite stable shareholder base. It's a bit like you could think maybe it's a bit like what's going on in AI at the moment with NVIDIA buying a stake in OpenAI and Microsoft buying a stake and they've got stakes in Anthropic and it's almost a little, it's kind of a little bit like this, but this has obviously been going for decades in Japan. But basically right at the middle of these groups is a core bank, which basically provides the financing and the coordinating, you know, amongst all of the group companies. And then the firms within this keiretsu often prioritize doing business with each other. Okay. Obviously, you know, so you've got suppliers and distributors and financing all within this group, all who own shares in each other. And then you've got this kind of cross-ownership, which basically reduces takeover risk. So, you know, it's, you know, friendly companies holding large stakes within each other. And this can then shield management from activist investors, for example, and hostile bids and so on. So the idea is it kind of enables the group to kind of think more about long-term stability and growth rather than short-term shareholder return. So this is the idea. It's a very famous thing. Now, this is where Elliott Investment Management managed to get in the middle of one of these by buying a slice of Toyota Industries, only 7%. And this is basically Toyota bringing it back into the fold. It's basically kicking Eliya out. There is history here because the company was founded, or well, no, sorry, Toyota Motors initially spun off Toyota Industries back in 1937. But the company was founded by Sakichi Toyoda. And that is Akio Toyoda's great-grandfather, the guy who's currently running the Toyota Group. So there's obviously a lot of, I would say, emotional, sentimental value in this asset from the Toyota Group's point of view. Hence why you are hearing words such as sweetened bid being thrown into the mix here, because Elliott Investment Management aren't stupid. They know there's a premium on this asset for that particular specific buyer because of the kind of history behind it all. So you have a look at some of the bit, the original bid actually came in at ¥6,300. Well, that must be, we're missing a billion on that, I assume. ¥16,300 billion or ¥16.3 trillion. That was the initial, oh no, that's per share. Apologies. So it was ¥16,300 per share was the initial bid. Then it got up to ¥18,800 as a revised offer. Now here, this sweetened bid where Elliott have gone, okay, fine, I'll take it, is up at ¥20,600. So you've had like a more than a 25% lift from that original bid to actually now the one that's kind of getting the deal done.

It would seem as well that looking at this from if you were working within industry and what are the trends and patterns that the government's influence here and the type of activity you're talking about quite as you've explained it, it seems like this is a very unique geography in terms of Japan for the reasons explained. And a number of Japanese companies have been taking full control, listed units and affiliates, or selling them. And it's all coming in the, I guess the drafts of the government pressing businesses to improve capital efficiency, things like corporate governance as well. So at a high level, then can we assume that this dynamic's going to keep fueling two things, restructuring and take privates, and the size of these companies, the complexity of them. It would mean that surely there's some good business to be had here for this type of scenario going forward, you would think.

Yeah, absolutely. Lots of action. I think Elliott have, they've played this very well. An example I want to give here is obviously they hold the stake right now, and so they're, you know, Toyota are coming in and bidding and Elliott are like, nope. And they're bidding and they're like, nope. And in this case, Elliott are doing their own valuation of this asset as a standalone themselves. And actually part of their thesis, in terms of the seller here, they can actually help to bump up the pricing by issuing their own guidance on the value of this business. So actually Elliott were, they did their own stuff and they're basically saying that as a standalone plan, you can basically, there's a clear path to about a ¥40,000 per share kind of valuation by 2028. They reckon. I mean, that's a punchy kind of hockey stick growth in kind of 2 years. But Elliott were obviously, obviously they're going to be very bullish on the value of this thing that they're trying to sell. But yeah, it's just quite an interesting thing. It's not just the buyer that values it and okay, places a bid and it's yes or no. If it's no, all right, we'll up the bid, right? It's also the seller can be proactive. In doing their own valuation, getting that into the mix and trying to showcase to the potential buyers that there's value over and above the kind of initial bids that come through.

Okay. Well, for the meat in our Elliott sandwich, because we'll come back to another Elliott story in a moment, let's talk a little bit about private equity. And I think what's quite interesting, just top level when I looked at this, one was that it's so funny when you start talking about AI and AI buildout, just how much wider the capital pool is in terms of the investors who want a little slice of this action. I mean, we've got America, Sweden, Qatar, California's Public Employees Retirement Fund. It's like everyone's involved, as has been the case and the theme, I guess. But top level, This is the consortium led by BlackRock's GIP, which you're probably becoming ever more familiar with in terms of a name. This is their Global Infrastructure Partners. So them and Swedish PE firm EQT have agreed to acquire US power company AES, the transaction valued at $33.4 billion including debt. The investor group will pay $15 a share in cash representing a total equity value of $10.7 billion. And timelines, AES expects the deal to close late this year, early next. But as I was mentioning, the consortium, there's always a consortium when it comes to AI financing, uh, that includes, uh, GIP, uh, and EQT alongside, as I said, California's Public Employees Retirement Fund and the Qatar's are in this as well. Their investment authority, so their kind of sovereign arm, their investment vehicle, if you like, are also involved. But I'm guessing where this is heading with the infrastructure play, but maybe you could gimme a bit more detail. What's the crux of this deal then?

Yeah. Well, you know, infrastructure's, it's a sexy thing these days, believe it or not. Hence that African deal we've just said. But this is like the the sexiest of the sexy because this deal is positioned as a bet on accelerating power demand driven by the AI boom. I mean, this is like hot, hot, hot kind of stuff. And so this US power company AES is like really primed front and center to be, fully taking advantage of this massive data center buildout, which obviously is just sucking huge amounts of energy from the system. And so, yeah, Reuters are framing this as part of a broader wave of larger power and utility transactions. And so AES also emphasized that the sale will provide it with capital it previously lacked to then expand US energy generation, right? So this is about getting investment in. It's about, you know, helping with that growth and expansion story. And then the other point was, one interesting other angle here with this deal from AEF, this is taking them private, right? And, you know, when you're a publicly listed company, you know, that comes with a huge amount of kind of regulatory burden where you've gotta be very, you know, open and transparent. You've gotta be producing quarterly earnings reports. This is where, your public shareholders are able to see your share price ticking up and down every second of every trading day. This is where you can, you know, there's a huge amount of scrutiny around being a public company. This therefore often actually shapes company strategy and makes it shorter and shorter and shorter term. One fault of this is actually boards putting in CEOs where CEOs have compensation that's linked to share price targets and so on. And this can often lead to this ever shorter-termist sort of strategic view, right? One thing that take privates do, well, it kind of removes all of that. All of that regulatory oversight just goes, right? And therefore, you know, AES are saying they can, they're no longer going to be constrained by the leverage of metrics public market investors want to see. This gives them a bit more freedom to actually start being a bit more aggressive and long-termist when it comes to investing in, you know, what is ultimately cap, you know, trying to capture one of the biggest opportunities for particularly US power companies that we've seen in, well, maybe ever, right? And so it's a bit about, right, well, let's go hard and aggressive now. Our metrics are going to get killed because of this in the short term in terms of our PE ratios and all the rest of it, because we're going to be plowing it all into growth. But that's fine because look, we're looking at the kind of longer-term vision here.

I'm assuming for AES as well, it makes sense that they need to deliver on what's ahead of them, the opportunity at hand. And so It's either you look at different ways to engineer that. You might have to reduce or eliminate a dividend. You might pursue substantial new equity issuances, or you can do a deal like this, and then that could significantly support your growth ambitions with that capital at hand. Would that be the right way to think about it?

Yeah, absolutely. Yeah, they were, this is it. They were struggling a little bit to kind of finance this growth. As you've said, the chairman Jay Morse had basically indicated that the dividend was going to get eliminated because, well, we don't want to send all the money out to shareholders and reimburse them. We want to use that money to grow, right? But obviously public shareholders don't like that. So, you know, it's that classic scenario here where let's take back private, let's take that road. But actually, interestingly, once this deal was announced, their share price, AES's share price fell 17%, actually to its lowest level since January 2026, which might on the first hand appear a little bit counterintuitive. Hang on. Shouldn't these deals normally kind of, aren't they at a premium and don't they juice the share price? But the thing is, this kind of stuff's been bumbling along since the summer of last year actually. So the offer was framed as a basically a 35.5% premium to the July 8th share price. So that was the last close. So back on July the 8th, that was the last closing share price before the first media report of a potential acquisition. So this has been bubbling along for like 8 months, right? And this is the thing, like when there's a potential acquisition, well then here obviously you get hedge funds getting in the way. Event-driven hedge funds are looking for kind of M&A arbitrage. And while the negotiations are happening, there's always this speculation around, well, what's the price going to be in the end? And I think because of this, I think in the end, because of this lack of internal funding available from AES, as in we're going to have to cancel the dividend to really execute here. I think actually here the big guns, you know, the big kind of money managers, the BlackRocks, and have kind of noticed that and have basically used that to kind of squeeze and apply a bit of pressure. And I think what we've ended up with here is a, is a valuation that's perhaps a touch lower than what some of the speculative hedgies out there might have originally thought. Hence the reason for the share price selling off, because it was pricing in too high evaluation for the deal.

And just the context then, the AES deal comes after this wave of transactions around power. So just to recap, we've had Blackstone and their $11.5 billion acquisition of TXNM Energy and also Constellation Energy, $16.4 billion buy of Calpine. So again, similar to our first one, it's hard to see this not sort of continuing in a similar vein as a theme for the year. JP Morgan lead on this on the AES side. Wells Fargo actually also acting as a financial advisor to AES, so supporting. GS acting as the financial advisor to GIP, and Citi's also in there for the Swedish private equity firm. So quite a bit going on there. On that point, looking at the league table year to date, well, here we go. A little bit of a quiz then. I've already kind of hinted towards the top, what the top of the table looks like. So what do you reckon the top 2 are?

JP Morgan, Goldman Sachs.

Okay. Just the other way round. Both companies correct. So at the moment, Goldman's has done 75 deals.

Is this M&A? Yeah. M&A deal.

This is directly applied to M&A advisor ranking.

Okay.

So GS has done 75, JP have done 70. The actual value of that in billions is Goldman's $270 billion, JP $204 billion. So who's now, who's, who's third? They popped up here on two of the deals we've spoken about already.

Oh, okay. That's not the answer I was going to give. So let me quickly scramble and change my guess to, uh, City.

Yes. City. Yeah. Okay. So City is third and they've actually seemingly worked on some of the biggest deals they've been on the ticket for, because as I said, GS and JP have done 75 and 70. Citi's only done 32.

Right.

But yet in value, they're third. Morgan Stanley has done 51, but they're fourth with a value of $126.8 billion. Rounding it out is Bank of America currently holding fifth. They finished 10th last year, entirety of 2025. So they're up at the moment ahead on head of schedule. Evercore are 6th, they were 12th last time. And the other movers we've got, I'd say Wells Fargo is currently cutting it at 7 and they were 13 last time. So yeah. Yep. Interesting.

All American banks.

All 7 Barclays is in there.

Where are Barclays?

7th actually.

Oh, they're 7th. Okay. All right.

And UBS rounding out at 10th.

Okay.

So, okay. So just to wrap then, to conclude, because it's always useful feedback has been to do so after we discuss each deal. So on this one, utility power generation assets are seeing rising acquisition interest, as we've just discussed, as AI data centre build-outs increase. Importantly, power demand and elevate the value of dependable generation and grid-linked portfolios. I wonder actually with these deals, do they fall under technology or utility and energy?

Are you asking me? I would've thought utility and energy, surely.

Yeah. But technology at the moment, I mean, if you look at the bar chart, it's all technology. Wow. Still, even to this day, it's all AI. It's, yeah, it's still that looking that way. It's quite hockey sticked to technology. And then the other thing here is about taking a capital-intensive utility private, as you were discussing. So more flexibility to invest by reducing pressure to meet the public demands of being a publicly listed company in that way. Whilst also thinking about funding what is otherwise a long-duration infrastructure buildout. All right, quick one on Pinterest. We'll fly through this and jump straight into the Warner Brothers one. So this was just to talk about Elliott Investment Management again, just because Pinterest is, you know, it's a popular tool, I guess, that's used. So Elliott have invested $1 billion, planning to use the proceeds to repurchase shares. The investment structured as $1 billion of convertible senior notes, an initial conversion price of $22.72 per share. Set at a 30% premium to the prior day's close. So what does that mean? And then why are Elliott taking such action?

Well, I mean, what, as a third, well, 30% premium. Yeah. I mean, look, I guess that sounds a lot, but it's not. I mean, their share price is a little bit underwhelming, to be honest. They haven't done, had a particularly great kind of run of it, particularly over the last 6 months. But actually you could really say over the last 5 years maybe. But basically Elliott framed itself as a long-term supporter. So basically noting that it's invested in Pinterest in the past. So actually Elliott, this isn't the first kind of chunk they've taken. They invested in Pinterest back in 2022. And so look, they're a key partner. I mean, Elliott sit on the board, right? So this is a board member coming in and kind of basically buying another slice, which, you know, if you think about it, if you're a Pinterest shareholder, you know, I'd take some confidence from that. You know, if you are literally someone sat on the board who's obviously privy to a lot more information about this business than than an average shareholder. If the board are wanting to buy still, then I'd say that's quite attractive. But there is a kind of plan here because as I mentioned, the share price has been under pressure. So 30% premium gets it to $22, which isn't very high. I mean, look, if you go back to last summer, it was trading $38, was the high of last year, for example. But they're going through a little bit of a change. So in January, They've announced that they're going to cut 15% of their workforce. So that's about 700 jobs. And basically it's looking to reallocate resources toward higher growth areas such as AI. I don't know, I don't use Pinterest, but so I don't know how, where it's at with the AI thing. I'm guessing nowhere given what's going on with the share price. But what's interesting to me about this Given that, that strategically maybe they haven't quite been doing so well, the funds that are coming in here is going to be used to, am I right in saying it's to fund share buybacks? Am I correct in saying that? Yeah.

Is that because there's a little bit of a play here where they're not going to be the biggest owners because they, by definition, as being activist, it's like, yeah. Influence without full control. So they're always of the mindset of let's slash the workforce and pivot to highest possible growth in shortest periods. So exposure to AI, let's engineer it where users can seamlessly purchase products that they're pinning with the images to some sort of AI sophisticated solution. So is it, is it, look, bear with us. Here's a bill, top up your funds for all the shareholders. You gotta, you just stay with us. We're all good. We've been here a while. Is this just a little bit of good faith?

Yeah, I mean, I guess so. Yeah. And like, maybe it's also their way of trying to gain more power at that board level to have an even larger kind of say and influence on strategic kind of maneuvers ahead. But yeah, for me, like for a company that's struggling, that's maybe a little bit behind in the AI thing, having to cut jobs, you know, rev— obviously, yeah, fine. That's the sort of activist investor play. But look, for a chunk of cash to be coming into the business to then be going straight out again, just from a share buyback point of view, fine. That juices the share price because you're basically taking, you're reducing the supply of shares and issuance. By buying them back. Apple are the kings of this, right? And so less shares in issuance just means your share price increases, right, over time. So maybe there's a bit of financial engineering going on from Elliott's perspective to try and just juice that share price as well.

Interesting thing, just to finish on this one, is that Goldman Sachs acted as the sole counterparty on the $1 billion accelerated share repurchase. What that means is that they tie in that their advisor and execution roles directly on those two mechanics on the announcement. So they get paid on both ends. It's always a win-win.

It's a double tap.

Double tap.

It's only a bill though, you know.

Yeah, double tap the bills, you know. So what's a bill between friends here? Exactly. All right. So let's talk about the final one, which is the conclusion of the Lord of the Rings type saga that has been Warner Brothers Discovery.

Let's put that out there.

I'll quickly run through context and then maybe you could fill us in on the outcomes and some of the strategic stuff. So just to remind everyone, if you, if I'm sure you've seen it, the headlines, but Paramount Skydance most recently submitted a higher proposal for Warner Bros. Discovery. They positioned it to obviously derail what was Warner's commitment, an existing deal with Netflix. And they were looking, Paramount, slight difference with Netflix, they were going to acquire the whole company. So how this went down was CNBC reported Paramount had raised its offer. In previous episodes, we had talked about the multiple levers in all the other ways to make the bid more appealing. And then they just went even further and actually raised the offer as well in the end, in this multi-step process to increase the incentives, if you like. All cash. So that's the other point. And included a $7 billion breakup fee if the deal fails to secure regulatory approval. I mean, In all the time we've been doing this show, I don't think I've seen a breakup fee of that magnitude or even close to that sort of size. Paramount also agreed to cover the $2.8 billion breakup fee. So again, just to be clear here, $7 billion breakup fee if it doesn't get regulatory approval. I'll top you up another 3 if there's a breakup fee on top of that. So, and they're feeling pretty, pretty con— I mean, that makes it compelling at that point. The next part is, uh, Netflix said it was, it was notified that Warner's board deemed Paramount Skydance's proposal a superior proposal, and Netflix confirmed, not going to match it. And this is where I thought it was really well played, or perhaps you could fill, fill us in because you talked about this before, these, these characters.

Well, you were telling me earlier, because when, when, when Warner's basically told Netflix that, soz, you know, finally Paramount have stumped up just a ridiculous package that we just cannot refuse. Then basically Netflix were given 4, basically, Warner's said to Netflix, like, you got 4 days. All right, Paramount, look, they've come in over the top. We're going to go with Paramount. You got 4 days to decide what to do. Okay. Netflix, 2 hours later. No thanks. Right. Which is hilarious.

Yeah. So Ted Sarandos and Greg Peters, they emphasized what the market are calling a disciplined mindset. And they, their words were describing Warner as a, after all of this and all of the money spent and the emotions and the resources, they said, yeah, you know, it's a nice to have at the right price, but not a must-have at any price. And so Netflix, you know, they walked away from it with an explicit forward-looking plan, which makes you think, hmm, maybe this was the tactic all along here. 'Cause not only did they refute it in 2 hours and go, no, no, no, no, no, we're serious. No, thank you. There's no more games here. They then followed that up immediately and said, Actually, our plan going forward includes investing about $20 billion this year in films and series and resuming share repurchases consistent with its capital allocation policy. So that I thought was quite poignant in the way that they said that.

It's interesting. You nailed it there, right? Basically, you got two players in the mix here for this. You obviously Netflix and Paramount going after this same asset. Netflix, as you said, it's a nice to have at the right price. Paramount, they are definitely in the must have at any price category. The way they've been going out about this in terms of upping bids, sweetening, it's ridiculous. Now, I don't know whether Netflix have just been sat behind closed doors, just kind of, uh, licking their lips because ultimately, yeah, we could take this. You know, we've got, we've, we're the lead here. We've, we've got the bid accepted, but you know, we can take it, but we don't need it. Let's at the very least, you know, juice this and push Paramount to levels that for them is crazy town. Ultimately, the amount of money they're going to have to finally kind of stump up to secure this, it's going to really hamper their ability thereafter to kind of fund any sort of kind of, you know, content creation in the future whilst Netflix are sat there going, well, all right, fine. You know, we're not gonna stump up a load of cash for Warner now, so let's just pivot this into content creation and really run over them. Plus they get, this is the beauty for Netflix, they get $2.8 billion in the bank because Warner's are breaking up the deal and they had a $2.8 billion breakup fee. Paramount are funding Warner's— Paramount are paying Netflix $2.8 billion to kind of step outta the way. So for Netflix, and this is as you said right at the start, Netflix share price went up off this actually, as did Paramount's. So weirdly, as you're saying, when you've got two entities fighting for the one asset. Finally, one wins. Both of the competing players' share prices rose, which I don't know if that's ever happened before, to be honest.

I think if you go back to one of our first conversations about this, and we did one, it was like, who's going to win, Paramount or Netflix? And we were both Paramount for the reasons we put forward. And in the end we were right. But that, yeah, for 90% of the time we were wrong because it was Netflix. Who was favored. And one of the things, the reasons why that we put the case forward that probably Netflix won't win is that two things. One, Netflix does not have a history of mega-sized deals.

Yeah.

I think the previous biggest one closest was like $660 million or something. Yeah. And now we're talking Warner agreed to be acquired by Paramount Skydance, $110 billion. So you're talking about going less than 1 bill up to 110. And we thought that was a bit of a stretch, but not only would it have been uncharacteristic in terms of the deal size, the other thing here was also thinking about it from, I guess, the complexity of your business model. Because they've been a streaming pure play, and then you start to bring in these other elements to it. Does that act as a distraction more than an addition? To your business. Yeah. So I think that was what helped. You had the fee, like you said, you get the $2.8 billion in the bag. That also, one of the other things I thought was interesting was one risk of losing the deal was that a combined Paramount Warner could pull popular content off Netflix to fuel its own offerings in competition. However, that now merged company will need all the cash flow it can muster just to service its substantial debt load, making that full shift away from the, you know, the biggest payer in town much less likely. So hence the reason why I think Netflix came out and said, oh yeah, by the way, we're going to invest a fresh $20 billion, by the way, in new movies and series. That was specifically to turn the screw on that last point, you feel.

It's a perfect defensive play from Netflix. It was very, the bid was very much about not not allowing the asset to go into competitors' hands. You know, it wasn't that they necessarily desperately needed or wanted it as part of their sort of strategic growth story. It was like, well, okay, let's not let a competitor get their hands on this unless we can force them to pay such a high price. It really kind of takes them off the table as a competitor anyway, because they'll have so much debt and a lack of cash flow that they're not going to be able to compete with our checkbook on content creation. So I think Netflix are, I think they're pretty happy with themselves. I would suggest coming outta this saga even though they didn't win.

Yeah. All right. Well, look, let's wrap it up there. Thank you so much, Piers, for your time and insights as always. Any requests? As was mentioned earlier, one of the top items on the show was because that's what you asked for. And we always try to deliver. So yeah, let us know if there's anything that you are hearing and watching that you think would be particularly interesting for us to talk about, but have a fantastic week ahead and remember to like and subscribe. I know it's, uh, I hate saying that, but it does help to get this content out to as many people as possible and to hopefully help them, um, in their future aspirations in their career, or just if they're interested in these types of deals. So have a good one. Thanks, Piers.

Thanks a lot.