Ellison Family Invests About $17 Billion in Warner Bros. Takeover

Now we have some new details emerging about the formation of Sky Dance. David Ellison and his family invested approximately $17,000,000,000 to complete the $110,000,000,000 Paramount Warner Brothers merger. That's according to public filings. Let's discuss with Bloomberg's Dylan Sloan. Dylan, I mean, they've just poured money into this thing. This is just another amount on top of what what the Ellisons have already put into Paramount's guidance. Exactly. Yeah. And, you know, in the year since that, this deal was initially agreed to, the real question along the whole time has just been what's the financing mix gonna look like. $110,000,000,000 enterprise value. And we've known for a long time that that was gonna be split roughly fifty fifty between debt and equity, but, of course, something that came up during the negotiations, and we've known for a long time is that that equity portion was gonna be backstopped by the Ellison family and Redbird, one of their longtime investors in Skydance. $47,000,000,000 is a lot of money even for Larry Ellison. You know, was briefly the richest man in the world last year, currently worth about a $194,000,000,000, but we've known that there's gonna be some outside investors coming in. And we now know from filings released recently that Allison and his family end up contributing about $17,000,000,000. We had some Mid East sovereign wealth funds coming in, a South Korean company coming in, and then and Red Bird kicked in a little bit of extra as well. Dylan, how realistic is this 6,000,000,000 of cost savings in three years, the synergies they claim? I mean, we've heard this so many times throughout the history of corporate acquisitions. Definitely. Yeah. I mean, the... That's definitely something that investors have been zeroing in on. The company is gonna be, you know, sitting on a pretty significant debt load, around $80,000,000,000 in net debt, as... Once they started trading yesterday. And, yeah, I mean, Ellison himself is verbally committed to cutting down on costs and and trying to address that leverage, so that's something the company is certainly gonna be looking at closely. But we'll we'll see on that front. I I was gonna say it's just such a tall order for them. It's something Mike and I have discussed before, the the movie slate that they're committed to building out. The fact, as you mentioned, that they have so much debt. I mean, Dylan, how fine of a line are they walking in order to make this thing work? And not to mention, already they've been met with skepticism with shares falling since this deal closed. Exactly. Yeah. Speaking specifically to the debt side of the financing, I mean, it was really a sprint to the finish. They closed $52,000,000,000 debt deal in just over a week, which is really pretty exceptionally fast for a deal of this size. What stands out here too, my colleagues reporting that, you know, usually in a deal like this, you'd be relying primarily on speculative grade debt. There was also a large tranche of investment grade debt here as well that doesn't come with the covenants that would typically typically come with that speculative grade debt. So, you know, offering some of those investors a little bit less protection than they might normally expect. You know, initially, we saw as soon as these bonds started trading, they did trade down. There was definitely some skepticisms from the market, but they've recovered since then. And, you know, again, significant debt load, but they've said, you know, verbally, they've they've committed that that's something they're they're gonna be tackling, keeping that leverage down. So we'll see where it goes from there. So how much, like, governance and sort of strategy influence are these sovereign wealth funds and other large investments coming? He's about three or four guys. That's a great question. Yeah. Honestly, we're still waiting on most of the filings to see exactly how that equity is split up. We know it was three Middle East sovereign wealth funds collectively. They kicked in about $24,000,000,000. Red Bird, who had already backed Sky Dance previously, they put in another 4,000,000,000, bringing their total investment to about 6,000,000,000. And then it was a South Korean retailer, Shinsegae Group, put in another billion dollars as well. So, yeah, after this private placement, we're still seeing exactly... Waiting to see how it's gonna be split down in terms of the equity. These are preliminary numbers that we're relying on from from this filing so far. But, again, you know, Allison is gonna be a significant shareholder. They're gonna, you know, have have significant operational control over the company there, so they'll be leading the pack. Dylan, thank you so much for joining. Great to have you on. That's Bloomberg's Dylan Sloan.