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Kind of a merger Tuesday, if you will. Es Da Latter Companies is in talk to buy pooge brands and a deal that would create a cosmetic giant about twenty billion dollars in annual sales. Here, let's get some more details on this transaction. We're joined by Clara Lizarraga. She is company's reporter for Bloomberg News. She is based in Madrid. Clara tell us a little bit about pooge brands. Who are they and why do you think Esday Lauder is in talks to acquire them?
Hi, Paul, thank you for having me.
So.
Pooje On, like Estilos, gets most of its revenues from fragrances. It owns major brands like Carolina Raban, brands that have products that have consistently been amongst the top ten best
selling fragrances. So for essay Loader, it would help strengthen their position in this category of fragrances where they currently get about seventeen percent of their revenues, And as you said, it would create a much larger company with a stronger exposure to Europe and Latin America and help it compete more efficiently against rivals like Laurel for example.
So, Clara, I guess the thing with essay latter is that this is a company in reorganization mode. It's got this plan to focus on niche luxury price fragrances. Does buy and Boots fit into that very specific strategy.
Well exactly, So this is These are some of the questions that have that have been asked to so whether this is the right time for a stayloader because they're in the middle of streamlining operations. They were at some point reviewing underperforming brands to see if they could divest from some of them and focusing on higher and more
profitable products. So there are questions about whether a deal with Pooje now would one be the right fit and also would be the right timing considering these other complex problems need to be resolved. The reaction so far so stay Lads shares have been falling yesterday and again today, So it would seem that these concerns are are definitely weighing in.
And Push is a family owned I know the CEO, Mark Push, a member of the founding family, did give up that role, but he is executive chairman.
What role does the family play in this company?
So the family owned most of the capital and over ninety percent of the voting rights. This is the third generation of the family and part of the reasons behind the IPO that happened less than two years ago was that they wanted to plan succession and prevent any tensions that could arise relating to generational change by listing the company and making sure that the you know, the future generations would be owners of the company, but not necessarily
in operational roles. So in that sense, a deal could go in further in that direction. But it also is surprising to think that the family would relinquish control over this company, which is over one hundred years old.
Yeah, there's so many things to have to kind of reconcile here. We talked about how Essay latter would want to add to its fragrance line to widen that portfolio. But the thing about Pooge is that it also operates as you mentioned Carolina Herrera and Nina Ricci. These are all fashion brands. They present collections during the Paris Fashion Week.
Is that something st a Lotter wants to get into or is it that something that say Lotter might I don't know divest or would that be part of the acquisition.
I think it would because so in essence, the poo strategy has been to buy brands. They make fashion, but they also create this image around the brand, and then thanks to that they sell the fragrances. So it sort of goes together and it's hard to separate the fashion from the fragrances. I think in that sense it would
be complimentary to estay Loader. I guess the question is Pooge also has a smaller part of the business that's called niche brands, so things like bi Redo, another one called Latis on Perfumer and these are much smaller brands with higher price higher prices that the company has been wanting to scale. But they currently account for roughly ten
to fifteen percent of revenues according to analysts. So that's something that would be interesting to essay Loader that there are questions about really how much can that grow and well, would they want all of these kinds of fragrances or only certain brands?
Is there any regulatory concern here about this deal getting approved?
There's some concerns on the makeup side, so Pooh Jones are Charlotte Tilbury, which I believe is the third largest makeup brand in the US, and so there could be issues on that front. But on the f grons front, I think it's it's not a problem.
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One of the things that the Bloomberg Intelligence folks are looking at is gaming out a recession scenario. That may be a little bit more on the front burner now with what's happening in Iran.
And one of those industries.
That you really have to be on the outlook for should the economy soften is the US auto business. And Steve Man joins us here Global Autos and Industrials Research channels for Bloomberg Intelligence, joining us live here in our Bloomberg at Directive Broker studio. So, Steve, I mean the auto business. I mean cyclical business, but also one that's undergoing profound transformation, trying to make this transformation to electric vehicles.
Probably not a lot of spare capital.
Lining around the cushion during if the economy were to soften.
How do you guys think about it?
Well, yeah, the industry did take a lot of write offs because you know, the EV sales are not going to be what it expected, especially in the UA. And we were actually coming into twenty twenty six relatively positive for the auto the big Detroit Big three because Trump eliminated, you know, the penalties on gas guzzlers. We thought, you know, they're gonna you know, these these automakers are going to push out these you know, pickup trucks and shuvs with
high margins. And that's how we came in looking at the industry at the being twenty twenty six. And then this the war broke out right, and gas prices are at where they're at. If you talk to the people that actually buy and sell gas oil, it's like one hundred and fifty bucks right on the ground. So it's gonna it's having a huge impact. Gasoline prices are up thirty forty percent where I'm at. So now the talk is, you know, are they going to sell that many pickup trucks and SUVs?
Especially with interest rates rising. That means auto loans also become more expensive for consumers. But people will still need cars and they will still need to upgrade or replace their aging vehicles. Where does that leave the automakers? I mean, do people go to secondhand cars? Do they take another look at hybrids and evs in this environment?
I think it's a combination of both. The third thing that could happen is they keep their cars a little bit longer. You know, that's going to benefit companies like O'Reilly AutoZone that actually sells after market parts. You know, a lot of a lot of consumers, especially in this k economy, those are looking who are looking for value in affordable vehicles'll will hold off, you know, even if
interest rates are lower. You know, they they want to make sure, you know, the jobs are stable and before they spend twenty thirty forty thousand.
Dollars how much is a new car again on average.
Average is fifty thousand.
Yeah, and I'll tell you my boy Joe is car in his car repair shop in mask on his lot is packed, man. I mean he's got more business what to do with. So that goes to your point. Yeah, people are keeping the cars longer. You know, if we get higher for longer fuel prices, does that revive maybe some demand in EV's and the hybrids.
It might look We actually looked at figure out when looked at what the worst case scenario is. We looked at past oil shock all the way back to you know, the Iranian revolution back in the seventies, and we're coming up with Okay, worst case sales in the US could drop as much as fifteen percent. Now the pie is shrinking, but even within that pie, the split is changing definitely.
I think it's no surprise if oil prices are high, it has happened in the past, people will be more interested in hybrids and this time around, you know, battery evs as well.
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One of the issues from an M and A perspective with the second Trump administration is this is going to be a very good time to get M and A done.
The regulation the regulators.
Whether it be the Federal Trade Commission, the Department of Justice, maybe be more accommodative. And I was certainly the expectation, and I from what I understand, that's turning out to.
Be the truth.
And we want to focus on one particular deal because it's a deal that I'm very familiar with having covered the media industry for a while, and that is next Star, big TV station owner, buying Tegna. Another big TV station owner, Jennifer re joins us. She's senior litigation and analyst from
Bloomberg Intelligence, joining us live here in our studio. So as I understand it, Next Star again, a huge owner of TV stations across the country, hundreds of them close its purchase of Tech, which are the old TV stations owned by Gannett Company, the newspaper company that closed. Yes, from the regulators like the Federal Communication Commission, the Justice Department.
Blessed the deal as people thought they would.
That's right, that's this administration. But there's still some suits going on. What's going on with.
That right, So that expectation that the Department of Justice and Federal Communications Commission will go ahead and allow that deal to go forward, I think ramped up a group of states to be ready to try to go after this deal. And it's because the states have been saying many states have been saying, and not just democratic state
attorneys general, but in a bipartisan way. The states have been saying, if this administration lacks anti trust enforcement, if they start allowing a lot of consolidation across many industries, we're going to pick up the slack because states have the right to enforce federal anti trust laws and they have the right to go after a merger that they believe is unlawful under the anti trust laws, just as the Department of Justice or Federal Trade Commission do. So
that's what we're seeing here. You have eight states that have said this wasn't right for different reasons. The FCC approval was improper for certain reasons, the Department of Justice clearance was improper for other reasons, and we're going to go ahead and go to court to try to see what we can do here.
I've been doing this mediam and a thing for a long time. I've never really seen this before. I'm sure it's been out there. So this is basically the state saying, for what a reason the federal governments from our perspective, from our point of view, is not as as strong a regulators it needs to be there for, We're going to pick up the slack and do it from a state level.
Yes, have we seen this before? Not a lot.
Normally, the states are sort of aligned with the Department of Justice or any of these agencies that are reviewing a deal.
We have one.
Example from several years ago when T Mobile and Sprint merged that they settled with the Department of Justice. They divested some assets to Dish and the Department of Justice went ahead and cleared the deal. The FCC cleared the deal, and the states went to court. A group of states I don't remember exactly how many, I think it might have been round ten went to court to try to
block that deal. And you know a lot of people would say, and I'll say in this case too for next Star, that once you have the federal regulators that have approved these deals. It is very difficult for the states to then go into court and convince a judge
that the experts that cleared the deal were wrong. The states lost in the T mobile sprint effort, and you know, we don't know yet what's going to happen with Nextstar, but they do go in with a tough case to make once the FCC and dj have approved, which they have.
So are they doing this these states? And you say it's bipartisans So it's not just democratic states that maybe wanted to just go against this administration's regulatory policy.
I think in this case it may simply be democratic states the ones that have sued Nextar. We also have states that have are continuing litigation against Live Nation that originally the Department of Justice had joined them with was the lead plaintiff. The Department of Justice settled with one week of trial. The states on a bipartisan in a bipartisan way, have gone forward to continue that litigation. So
we are seeing bipartisan efforts in that area. With the Next Star Tegna, I'd have to look at those eight states to see the attorney generals whether they are Democrats, or Republicans.
If your Next Star you close this deal, if you pay Tegna the money.
Yes, Is there any risk to Next.
Star that somebody, some judge could say you got to unwind this thing.
I think that risk is low.
I think actually getting an order saying you must unwind this is low. If there's some kind of a liability decision yet this deal was anti competitive, my guess would be the more likely outcome would be some divestitures of stations, which is honestly what I thought would have happened with this deal with the Department of Justice to start, if it had followed kind of its long standing tradition with
respect to TV broadcaster deals. Usually, the Department of Justice would ask these companies, including Nexttar, which has divested all sorts of stations doing deals in the past, to divest in a local area called a DMA in this case, to divest if they would own more than one of the local affiliates of the Big Four, which are NBCCBS, Fox, ABC.
And that rule today, having done a million broadcasting M and A deals in my life, seems so antiquated to that it was antiquated twenty years ago. But now with all the streaming, and I mean it's like, who cares.
Well, that's the argument the defendants will make, and that's what the Federal Communication Said Commission said in part in approving this deal. But I will say that there was an Eighth Circuit decision about the FCC's every four years it reviews its rules, about its review of its rules, and that narrow market definition focused on those broadcast stations in the Big Four was challenged, and the Eighth Circuit didn't reject that. They rejected rules changes for different reasons,
but not because of that market definition. And the thing is, Paul, I know viewership has changed radically, right in the last ten twenty years. You've got all the cord cutters. You have people who've never even heard of a cable subscription. But you still have a set of consumers that get those cable subscriptions or FiOS or whatever it is. They want those local stations, if they want sports, they want
the local programming they can get. And if you have a discrete set of consumers that could be harmed because prices go up, it can still be an ag trust harm.
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Switch gears. We'll go to healthcare, as we like to do. There's always news coming out of the healthcare business. There's always M and A trades and this is no different. Pfizer trying new They've been working on a line disease drug here and they recently had I think they had a study. It didn't really impress too much, but I'll tell you, in this part of the country, lime diseases no joke, boy, A lot of people.
Get it debilitated.
Yeah, and it affects you for life, even if you get over the worst of it in the first two years.
So there's just another air.
We're kind of waiting for the great science of the pharmaceutical and biotech industry to come to the rescue.
Sam Fazelli joints just Bloomberg Intelligence, director.
Of Research for Global Industries and a senior pharma analyst for Bloomberg. So, Sam, what's going on with Pfizer, What's going on broadly with this little niche field of limes disease.
Lime disease, Paul.
So all those farmers and folks who go out into fields have a risk of that. Of course, anyone who goes out into a into a green space, and you know I've got a bit of a garden, I'm sure you do. And those ticks, man, they do like your legs and anything that's nice and hidden in there to go and have a bite at. And all your animals suffer from it, et cetera. So those animals can take drugs to prevent ticks, but there's really no such thing
for humans. And I mean the vaccines have been around, but lime disease vaccine is something that would really be quite an attractive option for those who are at risk. The question is would take a lime this vaccine? But these guys had some data. It's data from a vaccine
that they're developing with a French partner called Valeva. It has been in development for a while and I'm just reading the details here again off the screen on the blueberog terminal seventy three percent effective against the tickborne illness, which of course can be as bad as in supply tast and causing major then longer term issues. So the few problem with seventy three percent, I mean, you know, is that good enough these days? I mean, think about
the COVID. COVID vaccines now are in background of people having lots of COVID infections, are in the fifty to sixty seventy percent range effective against hospitalization. Now that's on the background of lots of COVID infections. Here you're not you're testing it literally against somebody having no immunity. So seventy percent is not particularly high. So it'd be very interesting to see what they're regulator to say about this.
Sam. I'm kind of confused.
Why are there no current human vacs scenes from lime disease on the market. I mean, there was something I believe back in on late nineteen nineties from GSK, But this seems like something that's there's a real demand for efficacy.
We need efficacy, we need the effectiveness.
Sorry, in vaccine world, I've forgotten now all those years of writing about COVID you need vaccine effectiveness, which is how much does it protect you, how long does it protect you for? So this is something that I think would be interesting to see whether this result is better than what folks had been used to. But again, if you took this, you're only three quarters of the way. Let's say protect it and I'd like to see the data. How long does it last? Do you need another shot?
Who takes this? I mean, do we want to everybody? I mean people are hardly taking infectious vaccines where they can pick it up in the subway.
Are they going to worry about this? Take this?
Those are questions right astim At the beginning of President trump second term, there really a lot of threats towards universities and maybe some of their medical research. Has that in fact come to fruition. Our funds being withheld or funds being pulled. Is that impacting university research?
There has been some more uncertainty created funds not being released. There's been a lot of those situations arising. Of course, it's not just grants going to universities. It's also direct investments, for instance by the NIH which has a huge budget and age gives us grounds.
But they also have research institutes, Institute for this, institute for that. So there has been some effects. People are worried.
The number of people seeking to do PhDs in the STEM world has declined. I don't know what the latest statistic is, but has definitely declined. And that's really not helpful because it is this foundation of science that then.
Builds the future innovations. Right.
I don't think that that's I don't think that's rocket science, right. So I don't know why this became such a big thing, but I'm wondering whether it was just noise and it was playing to the public and this kind of eventually going to dissipate and go back to what it normally was.
And of course Congress needs to get in there.
You've seen him, for instance, Quurt's coming back saying what the HCHS has done isn't right for vaccines, et cetera.
So maybe this will happen here too.
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