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Speaker 2: Warner Brothers investors approved one hundred and ten billion dollars
Speaker 2: sale to Paramount. I also note, since I know David
Speaker 2: saslof that investors reject CEO compensation package.
Speaker 3: That's interesting.
Speaker 4: I know, is that binding?
Speaker 3: I don't know.
Speaker 2: I don't know how lot works. But our next guest,
Speaker 2: I think probably has some good reporting there, Chris Pomary.
Speaker 2: He covers all the entertainment companies out there in Los
Speaker 2: Angeles for Bloomberg News. Chris, what are you making the
Speaker 2: news here today? I guess it's fairly well expected that
Speaker 2: the shareholders would approve this sale to Paramount Sky Sky Dance. Paramount.
Speaker 5: Yeah, they showed them the money and they said yes,
Speaker 5: thirty one dollars this year, one hundred and ten billion
Speaker 5: dollars total. The pay package vote is not binding, you know.
Speaker 5: It's one of those say on paced things that companies
Speaker 5: are required to do. If this company were continuing as
Speaker 5: a public company, then you know, the board would take
Speaker 5: the you know that into consideration and next year's pay.
Speaker 5: But this this go round doesn't matter. They'll be gone
Speaker 5: and David Satisov will have his money.
Speaker 6: Right, We're looking at accelerating equity awards valued at more
Speaker 6: than five hundred million and three hundred and thirty five
Speaker 6: million dollars in potential tax reimbursements.
Speaker 4: So he makes out pretty well, so he always does.
Speaker 6: Chris, what does this mean for the thousands of Hollywood actors, screenwriters, directors,
Speaker 6: and other workers in the industry who have come together
Speaker 6: to oppose this merger? They were appealing to regulators, to policymakers.
Speaker 6: I mean, do they still continue to try to press
Speaker 6: state attorneys general to do something about this?
Speaker 5: They can, and they will. It's you know, it's not
Speaker 5: a done deal overall. Certainly it is from the shareholders standpoint.
Speaker 5: It's a milestone in that regard, but there's still regulatory
Speaker 5: approvals that have to be done, and everyone's sort of
Speaker 5: anticipating lawsuits similar to what we've seen in a live
Speaker 5: nation and other cases sort of opposing this deal. So yeah,
Speaker 5: quite still.
Speaker 4: Now on the federal government level, right.
Speaker 5: It doesn't appear that that's the case. I mean, there's
Speaker 5: been no official sign off. You know, the Paramount will
Speaker 5: say that they've gotten clear into essentially from the DJ,
Speaker 5: but there's really been no official sign off in Washington.
Speaker 2: You know, the deal price is thirty one dollars a share.
Speaker 2: Stocks trading at twenty seven dollars and thirty cents here.
Speaker 2: That feels like a big discount to me from an
Speaker 2: arbitrage perspective, given this deal is going to presumably closed
Speaker 2: in a couple of months. So I guess what do
Speaker 2: you think that uncertainty might be out there.
Speaker 3: In the marketplace?
Speaker 2: Chris? Is it regulatory? We need to get a sign
Speaker 2: off from President Trump and that can always be a risk.
Speaker 2: Is it some legal maybe lawsuits or something.
Speaker 3: What do you think is there und?
Speaker 5: I think all of above. I mean, really when we've
Speaker 5: really just seen a steady drum beat. I mean, the
Speaker 5: Hollywood community has sort of been against it, but you know,
Speaker 5: they had to shift, they had to go. They were
Speaker 5: posted to Netflix and then they sort of regather and
Speaker 5: now now they're opposed to Paramount. And so but we've seen,
Speaker 5: you know, the list of celebrities signing a petition against this,
Speaker 5: growing the number of events, people like Corey Booker, the
Speaker 5: Senator from New Jersey, of hell to sort of examine
Speaker 5: this deal and criticize this deal. So whether all enough
Speaker 5: mounts to something that will stop the deal still big
Speaker 5: question mark there, but they're certainly sort of growing opposition.
Speaker 6: So when does the companies Paramount, Warner Brothers Discovery, When
Speaker 6: do they start doing some of the hard work of
Speaker 6: integrating or is that something they cannot do until the
Speaker 6: regulators have made clear that they're not opposing.
Speaker 5: Yeah, they really have to wait to close. We saw
Speaker 5: in that next Star Techner deal where they jumped as
Speaker 5: soon as they got a clearance in Washington, and then
Speaker 5: the lawsuit happens and now they're actually barred from integrating.
Speaker 5: So very awkward situation. I imagine the Warner by the Paramount
Speaker 5: folks are looking at that and saying, all right, well,
Speaker 5: we should probably make sure we're in the clear before
Speaker 5: we actually close this.
Speaker 2: Chris, you're based in LA I'm sure you know a
Speaker 2: lot of these folks that work at these entertainment companies.
Speaker 2: How concerned are they just about La as a creative community,
Speaker 2: as a Hollywood community? Because here in New Jersey, Netflix
Speaker 2: is building a huge production complex in down A Fort Mammoth,
Speaker 2: the old army base. Tore down everything at this huge
Speaker 2: army base and are building this is a gajillion dollar
Speaker 2: production facility. I mean, there's Vancouver, there's South Carolina. There's
Speaker 2: lots of places that are taking business away. What's the
Speaker 2: mood in LA.
Speaker 4: Creatively, particularly gloomy.
Speaker 5: Yeah, and you know it's been that way. We've written
Speaker 5: about this for a couple of years now. You've had,
Speaker 5: you know, the flight to other locations to shoot. There's
Speaker 5: a big part of it. There's overall cutbacks and spend
Speaker 5: among big companies, and the globalization of the business has
Speaker 5: really changed things. And then you know we've got AI
Speaker 5: as a threat. So jobs are definitely weak, particularly here
Speaker 5: in the capital of entertainment. And so the idea of
Speaker 5: this big merger. While David Ellison, the CEO of Paramount,
Speaker 5: promises they'll be growth, everyone anticipates that it's going to
Speaker 5: be very difficult in.
Speaker 3: The labor market.
Speaker 4: Stay with us. More from Bloomberg Intelligence coming up after this.
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Speaker 2: Talk about the railroad stocks, one of my favorite sectors.
Speaker 2: I used to cover this group back in the eighties.
Speaker 2: I have all my earnings and models for the railroad
Speaker 2: and trucking companies, but they're on floppy disc so I
Speaker 2: don't think I can really access them anymore. But I'm
Speaker 2: sure they're still killer. Lee Classical Senior Transport, Logistics and
Speaker 2: Shipping analys fro Bloomberg Intelligence. He's got some pretty good
Speaker 2: earnings models to here. So Union Pacific stocks up about
Speaker 2: seven percent here today, up fifteen percent year today. How
Speaker 2: are their earnings lead?
Speaker 7: Yeah, their earnings were pretty good. They beat this morning
Speaker 7: on the first quarter, and it really was driven on
Speaker 7: productivity gains and pricing. The company was able to show
Speaker 7: that it's able to operate a better network, a more
Speaker 7: efficient network, despite the fact that volumes were slightly softer
Speaker 7: than most expected.
Speaker 3: They were down about one percent.
Speaker 7: The company really does appear focused that it can continue
Speaker 7: to get that productivity. Productivity could be more difficult if
Speaker 7: volumes do increase. Their outlook on the volumes, I would
Speaker 7: say was cautiously optimistic. There are some pluses and minuses.
Speaker 7: They were positive on their bulk commodities like coal and
Speaker 7: grain and also some domestic intermodal, while a little negative
Speaker 7: on their outlook as it relates to housing for as
Speaker 7: products that go into housing, automotives or international intermodals. So
Speaker 7: I think the outlook was a mixed bag. But the
Speaker 7: company is definitely executing on its plan, and it used
Speaker 7: the earnings call it's an opportunity to kind of plug
Speaker 7: the merits of its proposed merger with Norfolk Southern and folks.
Speaker 2: Just for rail geeks like Lee and I, this is
Speaker 2: a seismic transaction.
Speaker 3: The railroad business would.
Speaker 2: Create the first truly coast to coast to east west
Speaker 2: rail system in the US.
Speaker 8: LEE.
Speaker 2: But of course, the big, big, big issue is will
Speaker 2: the regulators allow. What's the feeling here?
Speaker 7: You know, the feeling is really mixed amongst participants, obviously
Speaker 7: Union Pacific and Northern Southern.
Speaker 3: You really think the deal is going to get done.
Speaker 7: If you're the other railroads or maybe some trucking companies,
Speaker 7: you might be hoping that it doesn't. It is a
Speaker 7: high regulatory hurdle that it has to meet. It has
Speaker 7: to meet that it enhances competition, it's in the public interest.
Speaker 7: Along time time ago, I think it was two thousand
Speaker 7: and one, they changed the rules for mergers at the
Speaker 7: STB and they wanted to kind of stop the consolidation
Speaker 7: that was happening in the marketplace, and it was kind
Speaker 7: of designed to stop a deal like this.
Speaker 3: The reality is that if.
Speaker 7: It does happen, it will create a truly transcontinental network.
Speaker 7: That will mean that railcars will be touched less. And
Speaker 7: if they're touched less, you would assume that hopefully they
Speaker 7: can get better service and that could benefit from the
Speaker 7: customers that are on it. They are, you know, full
Speaker 7: press lobbying to try to get the deal done. They
Speaker 7: recently announced a new locomotive, a new locomotive that commences
Speaker 7: that commemorates, excuse me, the two hundred and fifty year
Speaker 7: anniversary of the US And it also has Donald Trump's
Speaker 7: name on the side. So it looks like they're they're
Speaker 7: looking everywhere they can to get some help from the administration.
Speaker 3: That's a good move.
Speaker 2: How about if i'm CSX here, I noticed CSX stock
Speaker 2: is at.
Speaker 3: An all time high. I pump CSX.
Speaker 2: Do I feel the need to maybe reach out to
Speaker 2: Union Pacific or maybe the other Western railroad there and
Speaker 2: figure out that we need to do a deal as well.
Speaker 7: Yeah, so if the deal does happen, you would assume that,
Speaker 7: you know, more mergers will come, whether that's a Burlington
Speaker 7: Northern merger with CSX. Burlington Northern is owned by Berkshire
Speaker 7: Hathaway and so obviously Berkshire Hathway has some deep pockets
Speaker 7: to pay for CSX if it wanted to. Also could
Speaker 7: make sense of CSX one with one of the Canadian competitors,
Speaker 7: like a Canadian Pacific Kansas City, that could be an
Speaker 7: option as well.
Speaker 3: So if it does happen, and again it's a high.
Speaker 7: Regulatory hurdle and we probably won't find out until late
Speaker 7: next year, early twenty twenty eight whether the deal gets done.
Speaker 3: Yeah, it's going to take some time.
Speaker 7: They have to refile with the STB because their initial
Speaker 7: filing did not cut the mustard with the regulators, so
Speaker 7: they wanted them to refile and that should happen probably
Speaker 7: in the next thirty to sixty days. And so it
Speaker 7: just takes time because this is a huge transaction that
Speaker 7: the STB has Tom all over But yeah, I.
Speaker 3: Mean just answer your question.
Speaker 7: Yes, it could, you know, the announcement of the deal
Speaker 7: because the two companies, N Pacific Norfolk Southern really can't
Speaker 7: do anything together until they get approval. So it's been
Speaker 7: an opportunity for other rails to work together.
Speaker 3: And create new services.
Speaker 7: And you've seen some share shift away from Norfolk Southern
Speaker 7: to CSX on the intermodal side, which has been pretty
Speaker 7: interesting to watch.
Speaker 3: Lee.
Speaker 2: What are your transport that you cover everything in the trucks,
Speaker 2: the rails, the air freight, all that kind of stuff.
Speaker 2: The big ocean shipping companies. What's been the collective I
Speaker 2: don't know response to this war in Iran. Is it
Speaker 2: localized just to that part of the world or is
Speaker 2: it having wider ripple effects.
Speaker 7: Yeah, obviously it's impacting, you know, the shipping industry. It's
Speaker 7: keeping container rates artificially high just because it's tying up
Speaker 7: capacity and also assuming if there's a lasting piece, a
Speaker 7: sus canal can open up and that would make shipping
Speaker 7: rates come down considerably.
Speaker 5: You know.
Speaker 7: The biggest thing is it's pushing energy prices higher, diesel
Speaker 7: prices higher. That's a huge input for trucking rails. You know,
Speaker 7: they do have mechanics to offset that through fuel search charges,
Speaker 7: you know, just to pivot a little bit on the
Speaker 7: truckload side. Night Swift reported earnings last night. Their reportings,
Speaker 7: they pre announced and we knew it was gonna be
Speaker 7: a great quarter, which it wasn't, but their outlook really improved.
Speaker 7: So they expect rates to increase by high single digits,
Speaker 7: to load double digits, and that's up from low to
Speaker 7: mid single digits. So they're really seeing their rate recovery happening,
Speaker 7: and that's really being driven on the supply side, supply
Speaker 7: coming out of the market.
Speaker 4: Stay with us.
Speaker 3: More from Bloomberg Intelligence coming up after this.
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Speaker 2: Well, Blackstone, the world's largest alternative asset manager, reported a
Speaker 2: larger than expect to jump in distributable earnings in the
Speaker 2: first quarter, boosted by a robust start to the year
Speaker 2: for deal making.
Speaker 3: Let's break down further.
Speaker 2: We're joined by Paul Goldberg, senior equity analysts for Bloomberg Intelligence.
Speaker 2: Paul talks us about Blackstone. What did you learn from
Speaker 2: their earnings and their call about their business?
Speaker 9: I think the biggest thing for Blackstone is their size
Speaker 9: and diversification. As they did see some outflows from the
Speaker 9: retail fund the B credit in particular, they did get
Speaker 9: a lot of inflows across the company, so almost seventy
Speaker 9: billion dollars worth of inflows. So a lot of the
Speaker 9: fundraising and a lot of the activity is still holding
Speaker 9: up despite some of the pressure and the software pocket
Speaker 9: and the retail and the credit side.
Speaker 6: John Gray talked about AI infrastructure is driving Blackstone's performance.
Speaker 4: What does that mean?
Speaker 9: So they're invested in data centers, they invested in infrastructure
Speaker 9: that supports the AI expansion. They talked about one hundred
Speaker 9: and fifty billion dollars of assets across that kind of
Speaker 9: size that of businesses. That's over ten percent of their
Speaker 9: overall assets under management. And they also talked about even
Speaker 9: slightly larger amount of the similar kind of deals in
Speaker 9: the pipeline to expand in that space. So they're really
Speaker 9: supporting that growth.
Speaker 2: Paul, what's the story for black Zone and raising capital.
Speaker 2: Do they have all the capital they need or is
Speaker 2: this one of those Are they always in the market
Speaker 2: raising capital.
Speaker 9: I think they're always in the market. It really depends
Speaker 9: on what kind of vehicles. Sometimes there's a flegship fond,
Speaker 9: sometimes there's a new products, but given their size, they're
Speaker 9: really usually in the market with both types of products. So,
Speaker 9: for example, if you look at the b CRAD, it
Speaker 9: did get some inflows, but obviously because of the redemption,
Speaker 9: they got some outflows, but credit was credited. Insurance was
Speaker 9: still the biggest segment of their growth in terms of
Speaker 9: the inflows. They raised a ten billion dollar opportunistic credit
Speaker 9: fond during the quarter they closed it, So there's a
Speaker 9: lot of activity going on outside of the risk back
Speaker 9: pockets that we hear about.
Speaker 6: Is there a weakling here in these results? I know
Speaker 6: you mentioned the credit and insurance arm and how that
Speaker 6: still drew inflows, but earnings in that business dropped twenty
Speaker 6: six percent.
Speaker 9: They did, but I don't think necessarily it's a weakling.
Speaker 9: So there's still some of that is driven by performance
Speaker 9: piece they did have to and they didn't. We're very
Speaker 9: explicit about it because people are always concerned about valuations.
Speaker 9: They did mention that they were lowered the valuations in
Speaker 9: some liquid credit that had a negative return during the quarter.
Speaker 9: So that's more normal in terms of what we see
Speaker 9: in the public markets, and they're responding to it. Probably
Speaker 9: not at that scale that we've see in the public markets,
Speaker 9: but it's there. So there is some pressure, but overall
Speaker 9: there's still a reasonable growth.
Speaker 2: Stockdown four percent today, down about twenty percent year to date.
Speaker 2: Is Blackstone getting caught up in just the overall market
Speaker 2: concern as it relates to private credit?
Speaker 8: I think so.
Speaker 9: I think it's a matter of convincing the investors about
Speaker 9: the breadth and all the other businesses that are working,
Speaker 9: and the fact that the credit quality generally is holding
Speaker 9: up reasonably well. The companies that they're invested in and
Speaker 9: including the software partner businesses, they do it okay, So
Speaker 9: it will take a few quarters to convince the market
Speaker 9: to come around. So if we'll look at the be Read,
Speaker 9: there are the retail funds that they manage, a large
Speaker 9: fund going back several years. It took them a few
Speaker 9: quarters to work through those concerns. So we might see
Speaker 9: some more pressure coming into view even later on possibly,
Speaker 9: but the investors will come to realize the bigger picture.
Speaker 4: Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the bloom Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
Speaker 1: Auto with the Blueberg Business App. Listen on demand wherever
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Speaker 6: Jet fuel prices have been rising and it's been really
Speaker 6: bad for these airlines, which as far as I know,
Speaker 6: don't hedge.
Speaker 4: There are oil costs at all.
Speaker 6: They used to, right, but they don't anymore unless you
Speaker 6: have a refinery, right.
Speaker 4: Delta has that, right.
Speaker 3: That's pretty cool.
Speaker 4: All right, Let's bring in George Ferguson.
Speaker 6: He is our senior aerospace defense and an airlines analyst,
Speaker 6: and George American Airlines just reported. But I mean, for
Speaker 6: all these airlines, the story is the fuel bill. The
Speaker 6: fuel bill is surging.
Speaker 4: For them and it is having an impact on their
Speaker 4: bottom line.
Speaker 8: Yeah, definitely. Right.
Speaker 10: The name of the game right now in airline land
Speaker 10: is I need to increase fares. I think it's you know,
Speaker 10: they're roughly going to have to get up into the
Speaker 10: high teens to twenty percent rise in order to cover
Speaker 10: my increased fuel prices. Is one of the big challenges too,
Speaker 10: is as they you know, they need fares to rise,
Speaker 10: so they have to start to cut some capacity so
Speaker 10: they can they can get supply and demand back in balance.
Speaker 10: As they cut capacity, their costs go up, right, because
Speaker 10: there's a there's economies to scale, and so they start
Speaker 10: to get mid single digit and higher increases in cost
Speaker 10: per available seat mile as they trim their capacity growth.
Speaker 10: So it's a it's a real push pull kind of
Speaker 10: challenge here, and American came out and they hit it
Speaker 10: squarely with hey, we're not really going to adjust capacity
Speaker 10: very much in two Q, and we think we can
Speaker 10: get fair increases to compensate for a lot of it,
Speaker 10: but not all of it.
Speaker 2: What are the airlines saying about demand here? I mean,
Speaker 2: because I think airlines have some pretty good visibility people
Speaker 2: booking trips into the summer, maybe even longer, more longer
Speaker 2: term than that. How are they seen demand?
Speaker 10: Yeah, so, I mean I would say that across the board,
Speaker 10: you know, they've all sort of said demand was was
Speaker 10: very strong going into.
Speaker 8: You know, sort of the end of one Q into
Speaker 8: the summer travel season this year. So it sounds like
Speaker 8: the setup had been pretty good.
Speaker 10: And again now it's a function of the demand looks
Speaker 10: like it's still largely there, although they clearly wouldn't be
Speaker 10: cutting capacity if it was there and just would take
Speaker 10: a big price increase in fares. So a lot of
Speaker 10: them are and I shouldn't say cutting capacity, they're trimming
Speaker 10: growth plans, especially the big full service carriers, because I mean,
Speaker 10: to me, that tells me that they can't get they
Speaker 10: can't push through the full price increase they need. And
Speaker 10: a lot of them are talking about the cadence of
Speaker 10: getting that full recovery in fares to compensate for higher
Speaker 10: fuel prices, and they're kind of telling us that. You know,
Speaker 10: we heard from United that by the end of the year,
Speaker 10: by four Q they thought they'd be fully compensated. American
Speaker 10: told us they thought they would almost be fully competent
Speaker 10: stated by the end of four Q.
Speaker 8: So you can see a cadence here.
Speaker 10: Where's going to take them a bunch of the year
Speaker 10: to really drive through that those higher ticket prices and
Speaker 10: get back the increased fuel prices if they stay here.
Speaker 10: If fuel prices stay here.
Speaker 6: Well, we know demand also looks very good because consumers
Speaker 6: are booking their flights for this summer and maybe for
Speaker 6: the holidays that they know they're going to be going away,
Speaker 6: knowing full well that fares are going up, up, up.
Speaker 6: I mean, that's been kind of a steady drumbeat of
Speaker 6: the newsflow for companies sending employees to go do business
Speaker 6: in other parts of the world and country that kind
Speaker 6: of ends up being something you book maybe a month out.
Speaker 4: What does corporate travel look like? What do we learn
Speaker 4: from the airlines about that?
Speaker 10: Again, the commentary we're hearing right now is that corporate
Speaker 10: travel is continuing to recover, it was doing well, is
Speaker 10: doing well, you know, and so from a demand perspective,
Speaker 10: we're hearing good things. But agree with you on that,
Speaker 10: Scarlett that I think that you know you're going to
Speaker 10: have to some degree that people that absolutely want to
Speaker 10: go or have to go, rushing to book here. Right,
Speaker 10: we know the airlines haven't booked out their entire schedule
Speaker 10: for the summer and into the fall. Against summer, we're
Speaker 10: coming into vacation season. It's traditionally a very leisure focused
Speaker 10: season and again one of their strongest. So this fuel
Speaker 10: spike comes at a good time for them to pass
Speaker 10: through some of those increases It's going to be more
Speaker 10: interesting to see what happens as we get into four
Speaker 10: Q and one queue of next year if these fuel
Speaker 10: prices remain high. And yeah, I don't think we have
Speaker 10: the full story of corporate, but they're telling us in
Speaker 10: earnings corporate looks good, but like you said, it's a
Speaker 10: shorter booking window on corporate.
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