The merger happens: stories you may have missed

There’s a good chance you actually did see the news that Paramount (PSKY) has been given the all-clear to buy Warner Bros (WBD). But since I’ve written about that drama a few times already in these Saturday articles, I don’t want to miss a final commentary.

Fortunately, they’re called “stories you may have missed,” not “stories you definitely missed.”

In this story’s case, California State Attorney General Rob Bonta has (reportedly, as of the time of this writing) agreed to drop his lawsuit holding the merger up in exchange for some guarantees.

One of the biggest concessions on Paramount’s part is that it will have to release no less than 30 films per year in theaters. If it doesn’t, it will have to pay $30 million per movie missed – and perhaps even sell its 49% stake in Miramax.

There are rumors about why Bonta had a change of heart after so many months. But it is a fact that Paramount CEO David Ellison has grown increasingly frustrated with the holdup, sending him searching for more merger-friendly states to do business with.

If the studio left California, it could easily have devastating effects on the economy.

Apparently, many big-name Hollywood insiders have also been increasingly warning Bonta and Governor Gavin Newsom that both Paramount and Warner Bros could fail altogether if they don’t merge. In which case, there’s no two ways about it.

The state would be in dire straits.

We’ll see what further details emerge in the days ahead. But for now, it looks very likely that an enlarged Paramount will continue to be a Hollywood-based institution.

It appears that the nostalgia trade is strong enough to bring back Toys R Us, that very important store so many of us used to frequent back in the day, either as kids or parents of kids.

That place was the staple for birthday and Christmas present shopping for decades. But it fell on hard enough times as online retail expanded that it had to declare bankruptcy in 2017. Restructuring involved Toys R Us shuttering the vast majority of its stores the following year.

And by the end of 2021, after being acquired by WHP Global, it had no physical locations left at all. But only for a time…

WHP went on to open a single location at American Dream Mall in East Rutherford, New Jersey. Then it expanded further in partnership with Macy’s (M), adding designated sections within those stores.

There are also 36 “regular” Toys R Us stores open across the U.S. today. But it looks like that number will rise to 156 by the holidays thanks to the pop-up-shop concept.

WHP has decided there’s enough demand to take up temporary space in 120 locations, though only for the Christmas shopping season. After that, they’ll close back down.

Unless, of course, demand is strong enough to warrant further occupancy. In which case, nostalgia buyers, it’s all up to you!

Like many other companies under Trump’s second term, Coca-Cola (KO) is betting on America. For its part, that means a $10 billion infrastructure buildout planned through 2030 that includes manufacturing, distribution, processing facilities, and offices.

One of those projects is the 620,000 square-foot bottling plant in Rancho Cucamonga, California, which it broke ground for back in February. That alone will cost up to $650 million and is designed to replace a nearby plant that’s 52 years old.

Another upcoming California-specific example is a production facility – the first one Coca-Cola has opened there in 60 years. As such, this campus will include renewable-energy systems, as I imagine many or even most of these projects will.

Elsewhere, there’s a:

Coca-Cola already contributes an estimated $85 billion each year to U.S. GDP and employs or otherwise enables almost 1 million jobs. But it looks like that number will grow further from here.

Bottles up, boys and girls!

Happy SWAN investing,

Brad Thomas
Editor, The Wide Moat Daily