WEBVTT - BI Weekend: Oracle, Macy’s Earnings 0:00:02.160 --> 0:00:06.000 This is Bloomberg Intelligence with Alex Steel and Paulsweenye. 0:00:06.080 --> 0:00:09.319 The real app performance has been the US corporate high yield. 0:00:09.480 --> 0:00:11.840 Are the companies lean enough? Have they trimmed all the fats? 0:00:11.880 --> 0:00:15.680 The semiconductor business is a really cyclical business. 0:00:15.200 --> 0:00:18.759 Breaking market headlines and corporate news from across the globe. 0:00:18.840 --> 0:00:21.439 Do investors like the M and A that we've seen? 0:00:21.680 --> 0:00:24.720 These are two big time blue chip companies. 0:00:25.040 --> 0:00:29.760 Window between the peak and cut changing super fast Bloomberg. 0:00:29.280 --> 0:00:33.600 Intelligence with Alex Steel and Paulsweenye on Bloomberg Radio. 0:00:34.840 --> 0:00:37.479 On Today's Bloomberg Intelligence Show, we dig inside the big 0:00:37.520 --> 0:00:39.920 business stories impacting Wall Street and the global markets. 0:00:40.040 --> 0:00:41.960 Each and every week we provide in depth research and 0:00:42.040 --> 0:00:43.879 data on some of the two thousand companies in one 0:00:43.960 --> 0:00:46.760 hundred and thirty industries our analysts cover worldwide. 0:00:47.000 --> 0:00:48.800 Today, we'll break down a merger between two of the 0:00:48.800 --> 0:00:50.680 world's largest advertising groups PLAUS. 0:00:50.680 --> 0:00:53.400 We'll discuss why shares of the computer tech company Oracle 0:00:53.479 --> 0:00:54.760 fell by the most in a year. 0:00:55.160 --> 0:00:57.639 But first we dive into how I planned US supermarket 0:00:57.720 --> 0:01:00.920 merger between Kroger and Albertson's crumbled. And this came after 0:01:00.960 --> 0:01:02.400 Albertson terminated their. 0:01:02.240 --> 0:01:05.240 Packed Albertson's also set a file the lawsuit against Kroger, 0:01:05.280 --> 0:01:08.880 claiming the company failed to exercise best efforts to secure 0:01:08.920 --> 0:01:10.040 regulatory approval. 0:01:10.280 --> 0:01:12.720 The lawsuit comes after our federal judge blocked the deal, 0:01:12.800 --> 0:01:15.280 saying the merger with lesson competition and raise prices for 0:01:15.360 --> 0:01:16.360 your shoppers. For more. 0:01:16.400 --> 0:01:19.600 We are joined by Jen Ree Bloomberg Intelligence senior litigation analyst. 0:01:19.800 --> 0:01:22.400 We first asked Jen if it's common for merger partners 0:01:22.400 --> 0:01:24.040 on a broken deal to suit each other. 0:01:24.360 --> 0:01:26.600 It happens once in a while. Well, I'll say it's 0:01:26.640 --> 0:01:29.720 pretty rare, but it has happened. I mean, think about 0:01:29.760 --> 0:01:32.160 Anthemin Signa. I don't know if you remember that deal 0:01:32.200 --> 0:01:35.080 from back in twenty fifteen. It fell apart also, and 0:01:35.160 --> 0:01:37.280 there was litigation for a couple of years after the 0:01:37.319 --> 0:01:39.520 deal was terminated in Delaware. And you know, they both 0:01:39.560 --> 0:01:41.480 came out with nothing. Spent a lot of money and 0:01:41.520 --> 0:01:42.479 both came out with nothing. 0:01:42.920 --> 0:01:45.039 Is it true that you think that Kroger didn't do 0:01:45.160 --> 0:01:47.080 enough here? Like, do they have a leg to stand 0:01:47.120 --> 0:01:47.720 on Alberson? 0:01:48.080 --> 0:01:51.240 I think a breach of contract claim based on you know, 0:01:51.440 --> 0:01:55.160 failing to abide by sufficiently defending against the antitrust claims 0:01:55.240 --> 0:01:57.520 is very difficult because you know, this is really very 0:01:57.560 --> 0:01:59.960 subjective and to some extent, when companies go to court 0:02:00.360 --> 0:02:02.440 and they have a remedy, they're sort of rolling the dice. 0:02:02.480 --> 0:02:04.880 They're hoping they'll convince the judge, even though they didn't 0:02:04.920 --> 0:02:07.200 convince the FTC. And I'm not so sure that you 0:02:07.200 --> 0:02:09.880 can think of that as a breach in this case though, 0:02:10.000 --> 0:02:13.120 having meant a trial, the remedy really was deficient. I mean, 0:02:13.200 --> 0:02:16.320 it was very difficult to understand how a judge, after 0:02:16.360 --> 0:02:19.079 the FDC presented their case on how this deal could 0:02:19.080 --> 0:02:21.639 cause harm in thousands of markets, how a judge could 0:02:21.680 --> 0:02:24.280 accept the remedy that had been put forward by Kroger, 0:02:24.320 --> 0:02:27.800 which was really very piecemeal, very complicated and difficult, and 0:02:27.840 --> 0:02:30.079 didn't really have the best buyer. So you know, we're 0:02:30.080 --> 0:02:31.600 gonna have to see what happens here with this. 0:02:31.960 --> 0:02:35.239 I mean, so again, I kind of thought that's kind 0:02:35.240 --> 0:02:38.600 of what a partially what a breakup fee kind of 0:02:38.680 --> 0:02:41.280 covers there. I mean, if this deal doesn't go through 0:02:41.360 --> 0:02:44.560 for whatever reason, you guys wanted to buyas you initiated 0:02:44.560 --> 0:02:46.600 the deal, if it doesn't go through, right, you got 0:02:46.600 --> 0:02:47.720 to compensate. 0:02:47.280 --> 0:02:50.680 Me right, right, that's exactly right. The seller is really 0:02:50.919 --> 0:02:51.240 has a. 0:02:51.200 --> 0:02:54.040 Difficult time during that interim period, right, they lose employees. 0:02:54.080 --> 0:02:56.680 They can always enter new supply contracts, So this is 0:02:56.720 --> 0:02:59.520 really intended to make that seller whole, you know, in 0:02:59.560 --> 0:03:01.840 this case, I think now Kroger's turned around and said, no, 0:03:01.919 --> 0:03:04.960 it was it was Albertsons that breached the contract, you know, 0:03:05.000 --> 0:03:06.799 And of course they're probably doing that to get a 0:03:06.800 --> 0:03:09.640 little bit of leverage here. Maybe the hopes would be 0:03:09.800 --> 0:03:12.120 that they could settle for something less than that six 0:03:12.240 --> 0:03:14.600 hundred million breakup fee in order to make all the 0:03:14.639 --> 0:03:17.320 litigation go away. Maybe maybe that's what's happening here, just 0:03:17.360 --> 0:03:18.480 a little bit of leverage. 0:03:18.760 --> 0:03:20.640 But you know, again, we'll have to see what happens. 0:03:20.680 --> 0:03:22.639 It would be a shame if they continue to litigate 0:03:22.720 --> 0:03:24.960 this and spend millions more dollars. 0:03:25.000 --> 0:03:26.120 Good for the lawyers. 0:03:26.160 --> 0:03:28.880 A deal, dumb question? Is a deal really done? 0:03:29.080 --> 0:03:29.240 Oh? 0:03:29.320 --> 0:03:31.320 Yes, they killed for sure, it's done. 0:03:31.560 --> 0:03:35.080 So Albertson's is already terminated. They exercised their right under 0:03:35.120 --> 0:03:36.880 the agreement to terminate, so it is done. 0:03:36.880 --> 0:03:37.280 The deal. 0:03:37.520 --> 0:03:40.360 Agreement is no longer good. So if they even wanted 0:03:40.400 --> 0:03:42.640 to do another deal, they'd have to enter a new agreement. 0:03:43.160 --> 0:03:45.360 And now obviously there's antagonism between the. 0:03:45.320 --> 0:03:48.560 Companies, all right, in your world of antitrust, What is 0:03:48.600 --> 0:03:54.360 the expectation of change given a new administration, given you 0:03:54.600 --> 0:03:57.720 a Republican control House and Senate, is there any expectation 0:03:58.360 --> 0:03:59.440 that things will get easier? 0:03:59.520 --> 0:04:00.760 I think it get better. 0:04:00.840 --> 0:04:03.040 I think some of the exuberance on Wall Street is 0:04:03.040 --> 0:04:07.040 maybe a little overdone. These huge deals between competitors are 0:04:07.080 --> 0:04:09.320 still going to get challenged. And we have to remember 0:04:09.520 --> 0:04:12.000 that the two Republican FTC commissioners who will still be 0:04:12.040 --> 0:04:15.280 there on the Commission both voted yes to sue the 0:04:15.280 --> 0:04:17.520 Tapestry could pre deal and to sue the temper See 0:04:17.560 --> 0:04:20.680 Le Mattress Firm deal. They both said yes we should sue, 0:04:20.800 --> 0:04:23.719 so they are aligned in some restricts with suing the 0:04:23.720 --> 0:04:25.640 deals that could cause harm. I do think what we're 0:04:25.640 --> 0:04:27.520 going to see though, is an uptaking deals that can 0:04:27.520 --> 0:04:29.920 close with settlements. We didn't have any of that in Biden. 0:04:30.120 --> 0:04:33.040 The Biden enforcers did not want to settle deals if 0:04:33.080 --> 0:04:35.080 the deal was bad. They wanted to challenge the deal, 0:04:35.080 --> 0:04:37.039 and that's what they did. I think in this case, 0:04:37.279 --> 0:04:39.320 once we have a majority of the FTC and new 0:04:39.320 --> 0:04:41.279 people at the DOJ. We're going to see that list 0:04:41.279 --> 0:04:43.320 of settled deals that then go on to close grow. 0:04:43.600 --> 0:04:46.119 What do you make of the potential new FTC people 0:04:46.160 --> 0:04:47.279 coming in, Well. 0:04:47.160 --> 0:04:47.880 I'll just say this. 0:04:48.160 --> 0:04:52.480 If Lenakon's mission was to stop consolidation and revitalize antitrust, 0:04:52.680 --> 0:04:54.960 their mission is going to be to stop with they 0:04:54.960 --> 0:04:58.960 perceive as censorship of conservative viewpoints by big tech platforms. 0:04:59.000 --> 0:05:01.360 There has been a lot of talk about that, even 0:05:01.400 --> 0:05:04.440 suggesting that there could be collusion amongst big tech platforms 0:05:04.440 --> 0:05:08.000 to censor conservative viewpoints and that the FTC should be 0:05:08.080 --> 0:05:10.480 going after these companies under the anti trust laws to 0:05:10.520 --> 0:05:12.279 stop that. And I think that's going to be a 0:05:12.279 --> 0:05:13.000 big focus. 0:05:13.480 --> 0:05:18.000 So what's the timing there at the FTC and the DOJ. 0:05:18.160 --> 0:05:20.920 When do the new sheriffs, if you will, kind of 0:05:21.320 --> 0:05:21.920 get in town. 0:05:22.520 --> 0:05:26.080 The FTC could be DOJ will be quick, these people 0:05:26.080 --> 0:05:28.839 will leave. The appointees by Biden will leave in January, 0:05:29.360 --> 0:05:31.600 and that is the expectation also that Lena Kon at 0:05:31.600 --> 0:05:34.600 the FTC will leave in January. As soon as Trump 0:05:34.720 --> 0:05:38.600 is inaugurated January twenty, then Andrew Ferguson will become the chair. 0:05:38.680 --> 0:05:40.800 If Lena Khan is still there, she'll then just become 0:05:40.800 --> 0:05:43.320 a commissioner, but she will probably leave and then at 0:05:43.320 --> 0:05:45.360 that point he just has to get his new appointment 0:05:45.360 --> 0:05:48.760 mark meter through the Senate confirmation process. It could take 0:05:48.760 --> 0:05:51.159 a few months. He has a majority in the Senate 0:05:51.200 --> 0:05:52.560 in the House. I don't think it's going to be 0:05:52.560 --> 0:05:54.479 too difficult. So it'll be a few months and in 0:05:54.520 --> 0:05:56.960 the meantime it'll be a two to two FTC. Probably 0:05:57.279 --> 0:05:59.960 the DJ will change over more quickly, probably in January. 0:06:00.400 --> 0:06:03.080 So if I'm a company and I'm interested in buying 0:06:03.120 --> 0:06:05.359 another company, do I get on the list now? Do 0:06:05.440 --> 0:06:07.840 I wait until all this stuff is cleared and then 0:06:07.880 --> 0:06:10.120 I get on the waiting list to get my deal done? 0:06:10.200 --> 0:06:11.280 Like what's my strategy? 0:06:11.640 --> 0:06:13.960 I think if you know that it has some issues, 0:06:14.040 --> 0:06:16.320 if you know you're probably going to get investigated, you 0:06:16.360 --> 0:06:18.359 can go ahead and file it now because you have 0:06:18.480 --> 0:06:20.640 eight months ahead of you and the new people will 0:06:20.640 --> 0:06:21.520 be the decision maker. 0:06:21.520 --> 0:06:22.520 So if you have a deal you. 0:06:22.440 --> 0:06:24.520 Think has no issues and could get through in thirty days, 0:06:24.520 --> 0:06:27.720 maybe you wait right because you have a greater hope 0:06:27.720 --> 0:06:29.520 of just getting get cleared in thirty days once the 0:06:29.560 --> 0:06:30.800 new people are in all right. 0:06:30.800 --> 0:06:33.640 Thanks to Jen Rey, Bloomberg Intelligence Senior Litigation analyst. 0:06:34.040 --> 0:06:36.360 This week we focused on a Bloomberg Big Take story 0:06:36.520 --> 0:06:40.520 entitled Jane Fraser stares down skeptics ahead of City's critical year. 0:06:40.760 --> 0:06:43.000 You can find it on Bloomberg dot Com and the Terminal, 0:06:43.000 --> 0:06:46.279 and the story looks at extensive reporting and an exclusive 0:06:46.320 --> 0:06:49.600 interview with Citygroup CEO Jane Fraser, and it illustrates her 0:06:49.640 --> 0:06:51.440 five year plan to turn the bank around. 0:06:51.640 --> 0:06:51.960 For more. 0:06:52.000 --> 0:06:54.200 We were joined by the story's author, Todd Gillespie, a 0:06:54.240 --> 0:06:55.359 Bloomberg Finance reporter. 0:06:55.600 --> 0:06:57.600 We first asked Todd to break down his reporting and 0:06:57.600 --> 0:06:59.000 how Citygroup has done recently. 0:06:59.360 --> 0:07:02.000 Thanks generally speaking as a sector have done really well 0:07:02.000 --> 0:07:04.279 this year. You know, Citi's kind of sitting the middle 0:07:04.320 --> 0:07:06.480 of the pack of the top six major US banks, 0:07:06.480 --> 0:07:07.760 so they're doing okay. 0:07:09.000 --> 0:07:09.240 You know. 0:07:09.520 --> 0:07:12.680 Mark Mason, the CFO, said that the bank is set 0:07:12.720 --> 0:07:14.840 to hit the top end of its revenue guidance for 0:07:14.880 --> 0:07:17.960 the end of this year. So after years of disappointing people, 0:07:18.160 --> 0:07:21.360 you know, investors, analysts, slowly maybe starting to think that 0:07:21.400 --> 0:07:22.600 she can turn the ship around. 0:07:22.880 --> 0:07:24.000 But it's a huge task. 0:07:24.440 --> 0:07:26.440 Why is the ship so big and why is it 0:07:26.520 --> 0:07:28.040 so hard to turn Well. 0:07:28.120 --> 0:07:31.200 City Group is you know, was once before the financial crisis, 0:07:31.200 --> 0:07:35.160 the world's largest financial company. It was the US's largest bank. 0:07:35.960 --> 0:07:38.080 This is a company that is probably the most global 0:07:38.080 --> 0:07:40.680 bank in the world. It's the only bank, for instance, 0:07:40.720 --> 0:07:43.400 that has a significant presence in Lebanon, where it had 0:07:43.440 --> 0:07:45.480 to evacuate staff earlier this year. 0:07:46.280 --> 0:07:47.840 We reported that earlier this year. 0:07:47.880 --> 0:07:50.080 And yeah, so you know, it's one of those banks 0:07:50.080 --> 0:07:52.520 that is so sprawling, which is one of its advantages 0:07:52.880 --> 0:07:55.080 because it gets, you know, it enables it to have 0:07:55.160 --> 0:07:57.720 this incredible global network of payment systems and m and 0:07:57.760 --> 0:08:00.680 a advice and you know X in all sorts of 0:08:00.680 --> 0:08:01.280 different countries. 0:08:01.320 --> 0:08:02.480 But it's also a big hindrance. 0:08:03.280 --> 0:08:05.080 And one of the things that Jane Fraser has tried 0:08:05.080 --> 0:08:08.000 to do is pull in exit you know, thirteen of 0:08:08.080 --> 0:08:11.120 its retail markets where it has retail banking presence. It's 0:08:11.120 --> 0:08:15.320 about IPO, it's retail business in Mexico by twenty twenty six. 0:08:16.000 --> 0:08:18.720 So it's really kind of trying to straighten, you know, 0:08:19.040 --> 0:08:21.640 downsize in the right ways she's saying, and also increase 0:08:21.640 --> 0:08:24.840 its feed businesses like wealth management and banking as well. 0:08:25.080 --> 0:08:27.200 What does City want to be when it grows up? 0:08:27.240 --> 0:08:30.160 Does it want to be JP Morgan? Is that the 0:08:30.320 --> 0:08:33.560 aspiration for City or they have a different strategy. 0:08:34.520 --> 0:08:35.920 I mean, it's hard to com bear, but yeah, I 0:08:35.960 --> 0:08:38.400 mean I probably say JP Morgan is a bank. I 0:08:38.400 --> 0:08:40.120 mean i'd say small steps, you know, I think Bank 0:08:40.200 --> 0:08:42.360 for America. The way that Bank of America came out 0:08:42.400 --> 0:08:44.199 of the financial crisis was something that City could have 0:08:44.240 --> 0:08:45.080 only hoped to emulate. 0:08:45.200 --> 0:08:45.280 Right. 0:08:45.400 --> 0:08:48.200 City has really been a laggard since the financial crisis 0:08:48.880 --> 0:08:50.520 in a way that Bank of America was able to 0:08:50.559 --> 0:08:54.520 suddenly turn that ship around fairly strongly. City is only 0:08:54.559 --> 0:08:57.200 just managing to maybe start to start do that. 0:08:57.880 --> 0:08:58.080 You know. 0:08:58.520 --> 0:09:02.520 It has very large servicesiness payment system, just like JP Morgan. 0:09:03.400 --> 0:09:07.160 It's obviously it's banking business has been traditionally one of 0:09:07.200 --> 0:09:09.840 the smaller on the M and A side, but larger 0:09:09.880 --> 0:09:12.480 on the DCM and ECM side. So it's trying to 0:09:13.000 --> 0:09:14.560 trying to see if it can kind of even out 0:09:14.600 --> 0:09:20.319 those businesses as well. So yeah, it's unclear. I mean, yeah, 0:09:20.360 --> 0:09:22.360 maybe if Jamie Diamond had stayed at City Group back 0:09:22.360 --> 0:09:23.640 in the day, it. 0:09:23.679 --> 0:09:26.119 Would have had a very different trajectory In talking. 0:09:25.840 --> 0:09:29.200 To shareholders and talking to analysts, what's the vibe on 0:09:29.320 --> 0:09:31.319 Jane Fraser, like, is she doing a good job? 0:09:31.480 --> 0:09:31.640 Is it? 0:09:31.679 --> 0:09:35.000 I realize it's only halfway through, but what's the confidence level? 0:09:35.080 --> 0:09:37.280 Yeah, well she's passed halfway through now. I mean she 0:09:37.360 --> 0:09:39.680 set out these targets in March twenty twenty two. She 0:09:39.720 --> 0:09:41.800 says that by the end of twenty twenty six she 0:09:41.880 --> 0:09:44.559 can get to a return on tangible common equity of 0:09:44.720 --> 0:09:48.439 eleven to twelve percent. They're sitting rather unhappily just under 0:09:48.520 --> 0:09:50.200 seven percent right now, which is one of the key 0:09:50.240 --> 0:09:53.280 metrics that investors an analyst, are quite unhappy with, to 0:09:53.280 --> 0:09:56.080 be honest. But people like her as a CEO, you know, 0:09:56.120 --> 0:10:02.480 people respect her. She's pretty forthright, she's got empathy, you know, regulators, 0:10:03.000 --> 0:10:05.000 you know folks. I think people like dealing with her 0:10:05.160 --> 0:10:08.160 as a person. But obviously, when you take a bank 0:10:08.200 --> 0:10:11.000 through this massive change, you know, right, they announced twenty 0:10:11.040 --> 0:10:13.120 thousand job cuts at the beginning of this year, nine 0:10:13.200 --> 0:10:15.720 thousand of those still to go in the next two years. 0:10:16.760 --> 0:10:19.280 It's it's, you know, you're obviously going to have enemies 0:10:19.400 --> 0:10:21.439 and people who really don't like the way that you're 0:10:21.640 --> 0:10:23.199 you're moving this thing around. 0:10:23.360 --> 0:10:25.840 What's next for city in their turner REMP plant. Is 0:10:25.840 --> 0:10:28.240 there a mile post that investors are saying for this 0:10:28.280 --> 0:10:29.520 is the next thing we need to see. 0:10:29.720 --> 0:10:32.200 The next thing everyone needs to see is positive operating 0:10:32.280 --> 0:10:35.440 leverage that really consistently comes through. That's you know, that's 0:10:35.520 --> 0:10:39.679 that's revenues outpacing growth and revenues outpacing expenses for them 0:10:39.720 --> 0:10:41.600 in the next twelve months. And they also really want 0:10:41.600 --> 0:10:46.440 to see strong growth towards that RTC that returns target 0:10:46.800 --> 0:10:49.200 every quarter, quarter by quarter, and that's the kind of 0:10:49.240 --> 0:10:52.280 consistency that city has lacked for the past decade that 0:10:52.400 --> 0:10:55.080 Jane Fraser is really trying to bring back to the 0:10:55.120 --> 0:10:58.920 business and show investors that they can believe the targets 0:10:59.120 --> 0:11:02.040 that she and her CFO Mark Mason set out and 0:11:02.080 --> 0:11:06.000 actually stick to those so that they have that confidence 0:11:06.040 --> 0:11:08.720 in the market, they can get rid of those regulatory 0:11:09.000 --> 0:11:12.440 burdens that have kneecapped them for so long, and that 0:11:12.520 --> 0:11:15.120 city can really come out of this stronger, more streamlined, 0:11:15.160 --> 0:11:19.160 and finally, you know, put behind it this bloat that 0:11:19.200 --> 0:11:20.200 has really weighed it down. 0:11:20.520 --> 0:11:23.760 You also mentioned in the piece, but how they do 0:11:23.840 --> 0:11:25.760 good numbers, They deliver good numbers, they don't get the 0:11:25.760 --> 0:11:26.760 credit for it and earnings. 0:11:26.760 --> 0:11:27.360 What's up with that? 0:11:27.840 --> 0:11:28.160 Totally? 0:11:28.240 --> 0:11:30.679 I mean every you know, every quarter there. You know, 0:11:31.120 --> 0:11:33.920 if they post strong revenues, it's the ROTC number that's 0:11:33.960 --> 0:11:36.319 not quite right. If the ROTC number is good, it's 0:11:36.400 --> 0:11:38.560 revenues that aren't quite right, or it's something like that. 0:11:39.280 --> 0:11:42.320 And you know these are often battles really on earning schools. 0:11:42.320 --> 0:11:44.400 These are longer arning schools than most banks have, and 0:11:44.440 --> 0:11:46.880 you can really listen to those yourself. They do get 0:11:46.960 --> 0:11:49.240 quite colorful and quite lengthy, so you know you need 0:11:49.280 --> 0:11:52.000 to have an extra shot of espresso while they're going through. 0:11:52.840 --> 0:11:55.320 Thanks to Todd Gillespie, Bloomberg Finance. 0:11:55.040 --> 0:11:57.760 Reporter, coming up well, break down the carbon market and 0:11:57.760 --> 0:12:00.720 why it's a key part to transforming the energy landscape. 0:12:00.760 --> 0:12:03.440 You listening to Bloomberg Intelligence on Bloomberg Radio, providing in 0:12:03.480 --> 0:12:05.640 depth research and data on two thousand companies in one 0:12:05.679 --> 0:12:08.600 hundred and thirty industries. You can access Bloomberg Intelligence via 0:12:08.640 --> 0:12:09.600 Bigo in the terminal. 0:12:09.640 --> 0:12:12.400 I'm Paul Sweeney and a Malex Steel, and this is Bloomberg. 0:12:16.840 --> 0:12:20.720 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:12:20.800 --> 0:12:24.120 weekdays at ten am Eastern on Afocarplay and Android Auto 0:12:24.240 --> 0:12:27.120 with the Bloomberg Business app, Listen on demand wherever you 0:12:27.200 --> 0:12:31.360 get your podcasts, or watch us live on YouTube. 0:12:31.800 --> 0:12:34.200 We move next to a big deal in the media space. 0:12:34.240 --> 0:12:36.959 This week we heard that Onakrom Group is acquiring inner 0:12:36.960 --> 0:12:40.000 Public Group to create the world's largest advertising company. 0:12:40.280 --> 0:12:43.240 The deal values into Public at thirteen point three billion 0:12:43.320 --> 0:12:45.240 dollars and the merger has seen as a response to 0:12:45.280 --> 0:12:46.960 the changing advertising landscape. 0:12:47.000 --> 0:12:47.319 For more. 0:12:47.320 --> 0:12:50.080 We are joined by Githermongana than Bloomberg intelligence analysts on 0:12:50.160 --> 0:12:50.760 US Media. 0:12:51.160 --> 0:12:54.079 We first asked Githa exactly why this deal happened. 0:12:54.640 --> 0:12:57.400 Over the past ten to fifteen years, advertising has been 0:12:57.440 --> 0:13:01.120 completely disrupted by the likes of you know, Google and 0:13:01.200 --> 0:13:04.120 Meta where we've seen a complete shift of ad budgets 0:13:04.160 --> 0:13:07.360 from traditional mediums like you know, TV and radio and 0:13:07.400 --> 0:13:11.439 newspaper to really all digital forms of advertising to the Internet. 0:13:12.080 --> 0:13:15.280 And so there has been a lot of disintermediation with 0:13:15.400 --> 0:13:18.720 the ad agency holding companies all of these you know 0:13:18.800 --> 0:13:22.480 Madison Avenue type of agency companies that are only really 0:13:22.520 --> 0:13:24.920 a handful of them left. So you have the big 0:13:24.960 --> 0:13:28.560 four omnicommon Interpublic are of course two US based agencies, 0:13:28.600 --> 0:13:32.240 but the bigger ones are their European rivals, Publicies and WPP. 0:13:32.840 --> 0:13:35.000 And really what we're trying, what they're trying to do 0:13:35.080 --> 0:13:38.480 here is, you know, it's become such a data driven business. 0:13:38.480 --> 0:13:41.520 There is so much competition from big tech and now 0:13:41.520 --> 0:13:44.000 of course with the advent of AI, you know, this 0:13:44.120 --> 0:13:47.480 threat of disintermediation is only growing more and more. And 0:13:47.520 --> 0:13:49.960 I think this is absolutely the right time for consolidation. 0:13:50.000 --> 0:13:52.480 And this really just tells us about the amount of 0:13:52.520 --> 0:13:55.760 secular pressures in this industry, very very similar to the 0:13:56.080 --> 0:13:57.480 linear TV model in a way. 0:13:57.840 --> 0:14:00.880 How cost intensive is this business? How much do they 0:14:00.920 --> 0:14:01.640 spend on labor? 0:14:01.679 --> 0:14:05.360 For instance, sixty percent, sixty percent of all of their 0:14:05.400 --> 0:14:08.760 costs are are on labor. So really, this merger, in 0:14:08.840 --> 0:14:11.720 so many ways, John is really about saving costs. They 0:14:11.720 --> 0:14:15.199 already outlined about seven hundred and fifty million dollars in 0:14:15.600 --> 0:14:17.600 cost energies, and of course that is likely to go 0:14:17.720 --> 0:14:21.040 up as they kind of eliminate redundancies. And if you 0:14:21.120 --> 0:14:22.640 just kind of look at it over the course of 0:14:22.680 --> 0:14:24.480 the next ten years, I mean there have been multiple 0:14:24.520 --> 0:14:27.040 studies that have been conducted that have said that you know, 0:14:27.080 --> 0:14:30.560 with AI being able to create campaigns. Being able to 0:14:30.600 --> 0:14:34.040 create all of these the creative elements of what an 0:14:34.080 --> 0:14:38.480 ad agency does, almost thirty three thousand jobs or post 0:14:38.480 --> 0:14:42.080 to almost forty percent of the ad agency sector's jobs 0:14:42.280 --> 0:14:45.160 would have anyway been eliminated. So it is really going 0:14:45.200 --> 0:14:46.920 to come down to saving on on labor. 0:14:47.320 --> 0:14:47.640 Wow. 0:14:48.000 --> 0:14:52.640 So in this world where it's it's Facebook and it's YouTube, 0:14:52.680 --> 0:14:55.240 and if I'm Coca Cola and I'm Ford Motor Company 0:14:55.280 --> 0:14:57.440 and I'm going to do a big advertising buy on 0:14:57.440 --> 0:15:00.400 one of these digital platforms, how different is is than 0:15:01.080 --> 0:15:04.120 forty years ago when I was just advertising on network television. 0:15:04.400 --> 0:15:07.680 Yeah, it's really different now because all of these small 0:15:08.040 --> 0:15:11.760 businesses actually now just go directly to Google and Meta. 0:15:11.920 --> 0:15:13.880 So the way that it is now working is all 0:15:13.920 --> 0:15:17.040 of the small mom and pop stores, medium sized businesses 0:15:17.480 --> 0:15:20.000 are not going to these ad agency networks anymore. So 0:15:20.040 --> 0:15:23.640 it's really only a handful of these big brands that 0:15:23.720 --> 0:15:26.920 are really still you know, having their campaigns kind of 0:15:27.000 --> 0:15:30.640 designed by the big you know, ad agency networks. And 0:15:30.680 --> 0:15:33.600 even in those big brands, even brands like p ANDNG, 0:15:33.720 --> 0:15:37.200 even brands like Apple are really kind of going more 0:15:37.280 --> 0:15:40.080 and more in house. So it has become really difficult 0:15:40.240 --> 0:15:43.880 for the ad agency companies to kind of survive in 0:15:43.920 --> 0:15:46.040 this changing world, and they have to keep adapting, and 0:15:46.080 --> 0:15:49.280 they have to keep acquiring more data centric businesses. They 0:15:49.320 --> 0:15:53.160 have to keep investing more in AI really and in data. 0:15:53.200 --> 0:15:55.320 And if you kind of just look at omnicommon Interpublic 0:15:55.440 --> 0:15:58.760 versus their European rivals, they're actually lagging behind a little 0:15:58.800 --> 0:16:01.320 bit in terms of AI and tech investments. And I 0:16:01.400 --> 0:16:04.000 think this deal was kind of prompted a little bit 0:16:04.040 --> 0:16:04.880 by that as well. 0:16:05.080 --> 0:16:09.840 Can AI really deliver a creative execution for these firms? 0:16:10.240 --> 0:16:14.720 Yes, it can, maybe not at the highest level, but 0:16:14.760 --> 0:16:17.480 I think as you know, the algorithms kind of keep 0:16:17.520 --> 0:16:20.680 getting refined, we are definitely going to see a huge 0:16:20.760 --> 0:16:26.000 level of disintermediation. And even today, you know, we talk about, 0:16:26.200 --> 0:16:28.720 you know, these companies talk about how AI is helping 0:16:28.760 --> 0:16:32.280 them kind of refine their campaigns, kind of refine the messaging, 0:16:32.880 --> 0:16:35.320 get to better targeting. So AI is definitely a very 0:16:35.400 --> 0:16:37.000 very useful tool. And if you just kind of look 0:16:37.040 --> 0:16:40.120 at even Omnicom and Interpublic over the past year, one 0:16:40.120 --> 0:16:42.760 of the reasons why Interpublic has kind of been so 0:16:43.480 --> 0:16:46.080 keen to for the sale is because it has been 0:16:46.160 --> 0:16:49.240 losing so many clients. They lost a very very important 0:16:49.280 --> 0:16:53.560 client with Amazon, and really a whole string of account 0:16:53.720 --> 0:16:57.640 losses kind of precipitated this whole sale process. And on 0:16:57.680 --> 0:16:59.600 the other hand, if you look at Omnicom, they've actually 0:16:59.640 --> 0:17:03.760 have an AI assist tool called Omni which has helped 0:17:03.800 --> 0:17:06.520 them kind of really win a lot of clients. So 0:17:06.560 --> 0:17:09.400 we've kind of seen the two agency groups have very 0:17:09.520 --> 0:17:11.159 differing performances all right. 0:17:11.160 --> 0:17:14.679 Thanks to Keith Raganath and Bloomberg Intelligence Analysts on US media, 0:17:14.800 --> 0:17:15.320 each week. 0:17:15.200 --> 0:17:18.160 We look at research from Bloomberg and EF previously known 0:17:18.200 --> 0:17:19.439 as New Energy Finance. 0:17:19.600 --> 0:17:21.760 They're the team at Bloomberg that tracks and analyzes the 0:17:21.880 --> 0:17:25.840 energy transition from commodities to power, transport, industries, buildings, and 0:17:25.920 --> 0:17:27.040 agricultural sectors. 0:17:27.200 --> 0:17:29.440 This week, we took a look at the carbon market, 0:17:29.520 --> 0:17:32.679 a key part of transforming the energy landscape for more. 0:17:32.880 --> 0:17:35.880 We were joined by bo Chin b n EF, head 0:17:35.880 --> 0:17:38.240 of America's Environmental Markets and Weather analysts. 0:17:38.280 --> 0:17:40.400 We first asked bo to discuss what she's currently seeing 0:17:40.440 --> 0:17:42.480 in the US carbon market and what she expects in 0:17:42.520 --> 0:17:43.159 the year ahead. 0:17:43.480 --> 0:17:47.320 The US carbon market is now going through ups and downs, 0:17:47.359 --> 0:17:50.200 so this year has been super exciting year for US 0:17:50.280 --> 0:17:54.480