WEBVTT - Gabelli Funds Chairman & CEO Mario Gabelli Talks Paramount's Acquisition of Warner Brothers Discovery

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<v Speaker 1>I am now pleased to welcome to the show for

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<v Speaker 1>an exclusive interview founder, chairman and CEO of Gabelli Funds,

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<v Speaker 1>Mario Gabelli, and Mario, we're so pleased to have you

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<v Speaker 1>here on a week which maybe is the last week

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<v Speaker 1>we're going to be talking about the Warner Brothers Discovery

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<v Speaker 1>Netflix deal. Now that Netflix has bowed out, and it's

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<v Speaker 1>paramount raining as the winner. You have holdings of all

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<v Speaker 1>of these stocks, and you're a close follower of media deals.

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<v Speaker 1>Were you surprised to see Netflix fold and bow out

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<v Speaker 1>as quickly as it did?

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<v Speaker 2>Well, it wasn't exactly quickly.

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<v Speaker 3>On the other side, somebody always wins, somebody always backs out,

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<v Speaker 3>and it was obvious that unless they matched the materially

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<v Speaker 3>higher proposal and the simplification of the proposal and the

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<v Speaker 3>timing and adjusted their deal for the timing of getting

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<v Speaker 3>my cash back for my client. So the winnow was

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<v Speaker 3>Zaslov David conducted an auction. Stock has done extremely well,

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<v Speaker 3>so we thank him significantly for that. And now the

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<v Speaker 3>question is for Netflix. Their stock is also it was

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<v Speaker 3>down as seventy eight, it was up to ninety sixty

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<v Speaker 3>other day, and so there are a lot of individual

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<v Speaker 3>winners here for all of those involved in this bidding.

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<v Speaker 1>War, I would say, I mean, what does Netflix do now, Mario,

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<v Speaker 1>or what would you like to see them do now

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<v Speaker 1>they have a nice little two point eight billion dollar

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<v Speaker 1>breakup fee? Do you think that now they don't have

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<v Speaker 1>Warner Brothers Discovery? Would you like to see them go

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<v Speaker 1>after various ip and things of that nature.

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<v Speaker 3>The notion of taking their screaming and delivering it globally

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<v Speaker 3>and looking at how much they're spending on content of

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<v Speaker 3>twenty billion dollars, let them bring the content and show

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<v Speaker 3>that they're willing to keep it in the theaters for

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<v Speaker 3>that forty five day window. The second thing I would

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<v Speaker 3>like them to see is to learn Japanese and think

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<v Speaker 3>about knocking on Sony's door because of the anime that

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<v Speaker 3>does Sony is doing and figuring out a way to

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<v Speaker 3>partner on that.

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<v Speaker 2>For example, Sony's buying not getting into that one right now?

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<v Speaker 1>No, go ahead, please you? I mean, should they buy

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<v Speaker 1>something from Sony just a partnership? What would you propose?

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<v Speaker 3>I'm not proposing anything, and you know this is not

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<v Speaker 3>right now. My focus is for my clients that are taxable,

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<v Speaker 3>make sure they are long term to start thinking about

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<v Speaker 3>looking at other opportunities for their warner holdings. And right

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<v Speaker 3>now there's so many that will be announcing financial engineering.

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<v Speaker 3>For example, you had Janis on earlier, and that is

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<v Speaker 3>another example from.

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<v Speaker 2>Wearing an arbitrage hat.

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<v Speaker 3>You know what, since you mentioned that, we wrote a

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<v Speaker 3>book and it's now in about eight different languages on

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<v Speaker 3>M and A, one of the few books written. And

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<v Speaker 3>then we did a follow up and that deals with

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<v Speaker 3>like Elliott what is he doing in Tokyo? If you

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<v Speaker 3>want it, it's and Kate Welling and I prepare the

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<v Speaker 3>one on merging masters. So there's a lot going on,

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<v Speaker 3>and we expect a lot more going on. So this

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<v Speaker 3>is terrific time. M and A is vibrant, unlike appreciating.

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<v Speaker 2>Well last year.

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<v Speaker 3>Last year, for example, someone sabotaged the deal for a

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<v Speaker 3>company called I Robot. That stock was in the fifties

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<v Speaker 3>today at sixth sense, the arbitrary jures are not experiencing

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<v Speaker 3>those potholes because of the more attention of you know,

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<v Speaker 3>the benefits of globalization and benefits of consolidation, and you're

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<v Speaker 3>going to see more financial engineering.

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<v Speaker 2>Splitting off companies.

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<v Speaker 3>Why shouldn't I do a spin off and look at

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<v Speaker 3>what does that mean for the shoulders, because that's the

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<v Speaker 3>benefit of not paying the tax.

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<v Speaker 2>So there's a lot going on. This is terrific time.

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<v Speaker 1>All right, Well tell me Mario, I love this. This

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<v Speaker 1>is perfect time for you to be on the show too.

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<v Speaker 1>You share your your investors, get the money from Warner Brothers.

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<v Speaker 1>Discovery mentioned something Netflix might do. Janis Henderson, what would

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<v Speaker 1>you say, here's the top pick. Here is where the

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<v Speaker 1>corporate transformation and financial engineering is going to happen. And

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<v Speaker 1>I want to get them into that arbitrage?

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<v Speaker 2>What is your top call?

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<v Speaker 3>If you want to get into Harvard College and they're

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<v Speaker 3>in twenty years from now, all you want to do

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<v Speaker 3>is make eight percent of CAGU and have a five

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<v Speaker 3>twenty nine on the other side of the coin, I'd

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<v Speaker 3>rather see them go to the University of Virginia.

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<v Speaker 1>Amen.

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<v Speaker 3>So from that point of view, whenever someone wants to

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<v Speaker 3>allow individuals to in the free market system with all

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<v Speaker 3>of the flaws, with the rule of law, with all

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<v Speaker 3>the flaws, when you're talking about as meritocracy, and how

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<v Speaker 3>do we finance that? So that's important. And you saw

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<v Speaker 3>some ideas from DELI saw some ideas for the five

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<v Speaker 3>twenty nines and for four oh one case and so on.

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<v Speaker 3>From my point of view, tomorrow you'll be an announcement

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<v Speaker 3>for a company called Myers located in Akron, Ohio, like

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<v Speaker 3>forty million shares of a twenty three dollars stock. I

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<v Speaker 3>started following it because they have an autoparts distribution business.

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<v Speaker 3>Right now, there's one billion vehicles on the road. Does

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<v Speaker 3>three hundred million vehicles on the road in the United

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<v Speaker 3>States four tires per vehicle more or less, So that's

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<v Speaker 3>one point two billion opportunities to sell products. And the

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<v Speaker 3>average age of the vehicles are getting older. So what

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<v Speaker 3>companies help the tire being replaced? What happens when there's

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<v Speaker 3>a lot of snow for the first time in a

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<v Speaker 3>long time, What happens if there's ice. So these kind

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<v Speaker 3>of razor razor blade type businesses are very attractive, and

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<v Speaker 3>that would be a company that we're looking at very closely.

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<v Speaker 3>We owned it for a long period of time. There's

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<v Speaker 3>so many like that. For example, you saw the spinoff

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<v Speaker 3>from Comcast of versuon That stock was drubbed mercilessly by

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<v Speaker 3>the index funds selling it, and the stock, for example,

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<v Speaker 3>got as low as twenty seven eight. It was a

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<v Speaker 3>spinoff financial engineering gator. A great opportunity to sit there

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<v Speaker 3>with a basket and by it because we looked at

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<v Speaker 3>the fundamentals that Mark Lazars running it is going to

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<v Speaker 3>do a very good job of harnessing those values. So

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<v Speaker 3>those are the things that we liked, particularly where the

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<v Speaker 3>index funds.

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<v Speaker 1>Mario sell it.

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<v Speaker 2>Yeah, particularly, I'm finished spinoffs, and.

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<v Speaker 1>I was going to say you are You are the

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<v Speaker 1>ultimate value investor, and you have been throughout your entire career.

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<v Speaker 1>Let's talk about where the other value might be unlocked.

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<v Speaker 3>You were talking.

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<v Speaker 1>About this, but MSG Sports, I said, one of the best.

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<v Speaker 1>That's not what I said, Mario. You're a veteran of

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<v Speaker 1>this industry ATMSC. I know you as well.

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<v Speaker 3>Of like Buffett, you know value and even MSG Sports. Basically,

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<v Speaker 3>there is twenty four million shares the Dolan family owns

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<v Speaker 3>for a plus million, but they have control.

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<v Speaker 2>Of the vote.

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<v Speaker 3>Before you used to have a Jimmy Dolan discount. But

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<v Speaker 3>when the Sphere has gone, which was a spinoff, has

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<v Speaker 3>gone from like thirty dollars to one hundred and twenty

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<v Speaker 3>or one hundred and ten.

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<v Speaker 2>They're saying that, Hey, this is a creative individual.

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<v Speaker 3>He is not going to sell the knicks of the Rangers,

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<v Speaker 3>but he's splitting them off his two separate companies, assuming

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<v Speaker 3>they go ahead with this dynamic, and then the question

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<v Speaker 3>is will he sell a piece of each holding company

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<v Speaker 3>and then do what with it?

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<v Speaker 2>So those are the things that we like.

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<v Speaker 3>And tonight is a big night for the Knicks because

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<v Speaker 3>they're playing a team out of Oklahoma and they didn't

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<v Speaker 3>beat the team out of Toronto last night, so we'll see.

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<v Speaker 3>The Rangers are not doing well. But that's okay.

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<v Speaker 1>The values are still may on, Mario.

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<v Speaker 2>We are owners of Madison's running on. Is it Oka

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<v Speaker 2>or the.

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<v Speaker 1>Hey, Mario, do you think that that does 'tenough to

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<v Speaker 1>unlock the value splitting the Rangers in the Knicks or

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<v Speaker 1>would you like to see more? Do you want to

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<v Speaker 1>see something being sold? Is this the most logical deal

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<v Speaker 1>to get that?

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<v Speaker 3>Due?

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<v Speaker 2>Really? What you know?

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<v Speaker 3>You're just sort of the Miami Dolphins. Somebody said they

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<v Speaker 3>sold a piece of it at evaluation of X. The

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<v Speaker 3>notion of having sports franchises, whether it's the NFL, whether

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<v Speaker 3>it's MS, the NBA, the NHL, or the NFL, they

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<v Speaker 3>allow ten percent of that NFL to be owned by GPL.

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<v Speaker 2>And they structure LP interests.

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<v Speaker 3>You know, we are have a fund that is going

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<v Speaker 3>out and buying all of these companies in live events

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<v Speaker 3>and basically experiences, so they for example, going to a

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<v Speaker 3>Formula one racetrack, for example, watching Worldwide wrestling. Which are

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<v Speaker 3>the companies involved and how do you buy them? And

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<v Speaker 3>which ones are we can buy and bundle them together

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<v Speaker 3>so we don't have to pay to one in twenty

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<v Speaker 3>or one in fifteen that a GPLP structure does and

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<v Speaker 3>locks it up. So that's what we're thinking about every day.

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<v Speaker 3>And we have a conference coming up in June a

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<v Speaker 3>X number in terms of sports and entertainment. We do

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<v Speaker 3>a lot of conferences like that that the world is

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<v Speaker 3>invited to.

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<v Speaker 1>Hey, Mario, you also are involved in a lot of

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<v Speaker 1>different publicly traded sports stocks. I know it's something you like. Again,

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<v Speaker 1>unlocking value. What do you what do you think is

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<v Speaker 1>the most undervalued right now among your holdings when you

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<v Speaker 1>look out that you maybe want to add to in

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<v Speaker 1>the sporting.

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<v Speaker 2>World, Well, what's going to happen? That's a great question.

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<v Speaker 2>I appreciate that.

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<v Speaker 3>What are we going to see in the next three months,

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<v Speaker 3>obviously with some challenges on a global basis. Is the

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<v Speaker 3>World Cup soccer. We call it soccer, the world calls

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<v Speaker 3>it football. There's a company called man You, Manchester United,

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<v Speaker 3>the Glazier zone of control of the vote. They sold

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<v Speaker 3>the piece to an individual by name of James Radcliffe.

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<v Speaker 3>He owns twenty odd to nine percent and somewhere in

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<v Speaker 3>the next twelve months they're going to be able to

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<v Speaker 3>figure out whether they want to monetize that asset for

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<v Speaker 3>their own interest or monetizer because the world is going

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<v Speaker 3>to be interested in in quotes in soccer, and so

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<v Speaker 3>those are things that you think about. What other soccer

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<v Speaker 3>teams are there?

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<v Speaker 2>Okay?

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<v Speaker 3>So man You has one hundred and seventy five million

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<v Speaker 3>shares of stock is training. I can see it now

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<v Speaker 3>on your screen about seventeen fifty or seventeen eighteen dollars

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<v Speaker 3>and you.

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<v Speaker 2>Know why not this just be a punter and put

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<v Speaker 2>some down on it.

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<v Speaker 1>Okay, Just to wrap things up, Mario, and given what

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<v Speaker 1>a great environment it is to one read all of

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<v Speaker 1>your deal's books, but two play them in this market

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<v Speaker 1>and do the corporate arbitrage as you do. So well,

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<v Speaker 1>are you thinking right now? About deals that might happen

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<v Speaker 1>that could never even have been dreamed of in past administrations.

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<v Speaker 1>How different is it this time around?

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<v Speaker 3>No, it's not that they weren't dreamed about in the

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<v Speaker 3>last administration. And the free market system with oliflaws and

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<v Speaker 3>rule of low, with olaflows, you're constantly looking at what

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<v Speaker 3>do you want to do globally and what do you

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<v Speaker 3>want to do domestically to get synergies to grow your business? Okay,

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<v Speaker 3>and as a result of that, more field that's comfortable,

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<v Speaker 3>and this is an important.

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<v Speaker 2>Point that it will close.

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<v Speaker 3>They will hopefully go through and go through the Heartscot

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<v Speaker 3>Redino just the oj rules and by the way, those

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<v Speaker 3>rules are global. And so you're starting to see more

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<v Speaker 3>of an approach saying, you know, one on one equals three.

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<v Speaker 3>That's not so bad as opposed to watching Caprie drop

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<v Speaker 3>from forty dollars to nineteen or twenty, or your sportsman's

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<v Speaker 3>warehouse dropping from fifteen to.

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<v Speaker 2>A dollar thirty.

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<v Speaker 3>So the sportsmen and those that were busted deals. Uh,

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<v Speaker 3>you know, we start looking at and particularly spin offs

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<v Speaker 3>of companies that feel that they can grow better and

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<v Speaker 3>get a clear and multiple with regards to what's left

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<v Speaker 3>in the company. That is a very important part of

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<v Speaker 3>the of the dynamics of enterprise and M and A,

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<v Speaker 3>and so the CEOs are very optimistic that if they

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<v Speaker 3>want to announce something, they're going to get it done.

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<v Speaker 3>That's a different dynamic. They always wanted to do it.

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<v Speaker 3>Now they feel more comfortable in saying it's going to

0:11:53.360 --> 0:11:53.760
<v Speaker 3>get done.

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<v Speaker 1>Waits are you think that there are deals that are

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<v Speaker 1>fomed by the wayside that you think will be revert

0:12:00.320 --> 0:12:01.080
<v Speaker 1>what those.

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<v Speaker 3>We have several of them that we're focusing on. So

0:12:08.960 --> 0:12:10.959
<v Speaker 3>we're working on that. We'll see some of the other

0:12:11.000 --> 0:12:15.800
<v Speaker 3>ones that where companies bought them like SJM. Schmuckers bought

0:12:15.840 --> 0:12:18.839
<v Speaker 3>a company at the wrong timing and to figure out

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<v Speaker 3>how that could also maybe be re examined. In the

0:12:22.720 --> 0:12:25.160
<v Speaker 3>case of Myers, they bought a company called Signature, one

0:12:25.200 --> 0:12:29.319
<v Speaker 3>of the competitors of Signature, which puts down on construction

0:12:29.480 --> 0:12:33.400
<v Speaker 3>sites a layer of wood or a layer of composite

0:12:33.480 --> 0:12:36.960
<v Speaker 3>plastic or something like that, a composite that allows them

0:12:37.000 --> 0:12:39.720
<v Speaker 3>to do work. And construction work a company out of

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<v Speaker 3>Texas has gone from five dollars to fifteen and so

0:12:44.400 --> 0:12:46.719
<v Speaker 3>the world is starting to see that Connexpo right now

0:12:46.800 --> 0:12:49.640
<v Speaker 3>is going on in Las Vegas, and individuals and companies

0:12:49.679 --> 0:12:52.680
<v Speaker 3>are looking at those kind of dynamics. So that would

0:12:52.679 --> 0:12:56.120
<v Speaker 3>be another example Myers. For example, another company in Buffalo,

0:12:56.200 --> 0:12:59.160
<v Speaker 3>New York, which I've liked forever, is called National Fuel

0:12:59.200 --> 0:13:02.160
<v Speaker 3>and Gas. They land in the Marcellus and with LNG

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<v Speaker 3>being exploited, with Negast being a source of power for

0:13:07.400 --> 0:13:10.760
<v Speaker 3>the data centers in terms of electricity, they could sell

0:13:10.800 --> 0:13:11.959
<v Speaker 3>a piece of their utility.

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<v Speaker 1>It's a hot Hey Mario, I'm just going to have

0:13:15.720 --> 0:13:18.160
<v Speaker 1>to jump in. I hate to do this because we're

0:13:18.240 --> 0:13:20.800
<v Speaker 1>up against a hard break, but you are fantastic. Please

0:13:20.800 --> 0:13:24.360
<v Speaker 1>come join us again soon. The one and only Mario Gabelli, Founder, chairman,

0:13:24.559 --> 0:13:26.800
<v Speaker 1>and CEO of Gabelly Funds.