Paramount bypasses Warner board to pitch hostile USD108b bid

Good morning. Here's what happened overnight and what you need to know today.

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Hostile drama: Paramount Skydance submitted a hostile USD30-per-share all-cash bid for Warner Bros Discovery, taking its offer directly to shareholders just days after Warner agreed to a USD72 billion cash-and-stock deal with Netflix. Paramount said its USD108.4 billion ($164 billion) bid offers “USD18 billion more in cash” than Netflix’s and is backed by the Ellison family, RedBird Capital and USD54 billion in debt commitments from BofA, Citi and Apollo. Axios reported, citing regulatory filings, that Jared Kushner’s firm Affinity Patners is also helping to finance the bid. Paramount would buy the whole company, including cable networks like CNN and TNT, which Netflix’s deal excludes. Warner plans to spin off those assets before selling its studios and streaming business. Shareholders have until 8 January to respond. Paramount accused Warner of bias and said its bid faces fewer regulatory hurdles. The offer came after US President Donald Trump said the Netflix deal “could be a problem”. If Warner exits the Netflix deal, it must pay USD2.8 billion, but if the deal fails, Netflix would owe USD5.8 billion. (Capital Brief)(Warner Bros Discovery)(Paramount Discovery)(WSJ)(Bloomberg)

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Reddit challenge: Reddit is preparing to launch a High Court challenge to the Albanese government’s social media age laws, just one day before they come into effect. The Australian Financial Review reported the platform has enlisted barrister Perry Herzfeld SC and law firm Thomson Geer, with two sources familiar with the case saying the challenge is expected to focus on teenagers’ implied right to freedom of political communication. The new law lifts the minimum age to hold a social media account from 13 to 16 and applies to 10 platforms, including Reddit, TikTok, Instagram and Facebook. Passed in November 2024 with bipartisan support, the law follows a year of consultation, advertising and public campaigning and includes penalties of up to $49.5 million for breaches. The Paper cited a Reddit blog post saying it will begin asking new users for their age and estimating others’, but expressed “concern” the law undermines free expression and privacy. It also rejected its classification as a social media platform. A separate High Court case was lodged two weeks earlier by the Digital Freedom Project, involving two 15-year-olds. (AFR)

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Chinese diluted: Airwallex shrugged off controversy over alleged links to China to raise USD330 million ($497 million) at a USD8 billion valuation, in what is reportedly the second-largest venture capital raise in Australian history. The round was led by US VC firm Addition, with participation from T Rowe Price, Activant, Lingotto, Robinhood Ventures, TIAA Ventures, Square Peg Capital and Airtree Ventures. Of the total raised, USD160 million will be used for a share buyback to benefit employees and early shareholders. Tencent, which first backed the company in 2016, has reduced its stake to significantly less than 10%, and its board representative has exited, CEO Jack Zhang told the Financial Times. The company also named San Francisco as a second global headquarters, alongside Singapore, and said it plans to double its US headcount to more than 400 over the next 12 months. It expects to deploy over USD1 billion in the US between 2026 and 2029. Airwallex has rejected accusations of improper data practices involving China, saying Airwallex does not store US customer data in China or Hong Kong. He told the FT the raise was external validation as the company gears towards an IPO in three to four years. (Capital Brief)(FT)(AFR)(Bloomberg)

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AI core: IBM is making one of its biggest bets yet on AI with a USD11 billion ($16.6 billion) acquisition of data-streaming platform Confluent Inc, paying USD31 a share in cash. Based in Mountain View, California, Confluent provides infrastructure to manage real-time data streams for AI models. In a statement, IBM said the deal will create a “smart data platform for enterprise IT, purpose-built for AI”. CEO Arvind Krishna said the two firms will help clients deploy generative and agentic AI “better and faster”. The acquisition builds on a five-year partnership and will be funded with cash on hand. Bloomberg Intelligence analysts said it could significantly enhance IBM’s AI portfolio and software growth. The deal is expected to close by mid-2026 and includes a USD453.6 million breakup fee if terminated. The offer represents a 34% premium to Confluent’s last close. Confluent shares jumped nearly 30%, while IBM shares rose modestly. (Capital Brief)(IBM)(Bloomberg)(Reuters)

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AI control: Donald Trump said he will sign an executive order this week to establish a single American rule on AI to curb state laws that his administration and tech industry argue could stifle innovation. In a Truth Social post, Trump said “there must be only One Rulebook” and warned that allowing 50 states to set their own AI regulations would “destroy AI in its infancy.” A draft version of the order, seen by Bloomberg and CNN, would direct the US DOJ to challenge state AI laws in court and authorise federal agencies to withhold funding from states with policies deemed too restrictive. National Economic Council Director Kevin Hassett told CNBC the order is intended to make clear that “there’s one set of rules for American companies.” The proposal has drawn bipartisan criticism from state leaders, including Republican governors Ron DeSantis and Sarah Huckabee Sanders, and is expected to face legal challenges. It comes after the Senate previously voted 99-1 to remove language blocking state AI laws from a Trump-backed policy bill. (Reuters)(Bloomberg)(Politico)(NYT)

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Credit creep: A growing number of major fund managers are warning that inflated credit ratings and the rapid growth of private credit are creating new risks in the financial system as AI infrastructure spending rises and central banks have less capacity to step in. Dan Ivascyn, chief investment officer at Pimco, said on a Bloomberg podcast that it is “very, very dangerous” to assume a security is investment grade simply because a rating agency says so, warning there had been “so much growth in lending to lower-quality companies”. He said some investors are relying too heavily on third-party ratings, echoing the complacency seen before past financial crises. Separately BlackRock, T Rowe Price and Wilson Asset Management are seeing an increasing reliance on private credit to fund AI capex, as firms shift away from free cash flow. BlackRock’s 2026 Global Outlook warned this creates vulnerabilities, particularly in an already highly leveraged environment. The SEC and the BIS have also flagged risks from inflated private credit ratings and undercapitalised exposures. (Capital Brief)(Bloomberg)

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Uncontrolled power: The US Supreme Court’s conservative majority signalled it is likely to uphold Donald Trump’s removal of FTC member Rebecca Kelly Slaughter and scale back or overturn a 1935 precedent that restricts the president’s authority to fire independent agency leaders. During more than two hours of arguments on Monday local time, several justices appeared ready to dismantle Humphrey’s Executor v United States, a decision that upheld congressional limits on removing officials from multimember boards. Chief Justice John Roberts described the precedent as “a dried husk”, as Solicitor General D John Sauer urged the court to overrule it, calling it an “indefensible outlier”. Liberal justices warned such a move would hand the president “massive, unchecked, uncontrolled power” and undermine Congress’s ability to structure independent agencies. Trump dismissed Slaughter in March, saying she did not align with his agenda. Lower courts ruled the removal unlawful under a 1914 law allowing termination only for cause, but in September the Supreme Court allowed Trump’s removal of Slaughter to take effect while the appeal is pending. The court’s decision, expected by June, could affect more than 50 agencies, though justices indicated the Federal Reserve may be treated differently. A related case involving Fed Governor Lisa Cook will be heard in January. (NYT)(Bloomberg)(Reuters)

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Armada Aground: The Albanese government is facing growing pressure over the lack of progress on its long-promised Australian Strategic Fleet, 1435 days after the policy was first announced. The plan, unveiled before the 2022 election, was intended to support the local shipping industry and safeguard essential imports like fuel during global emergencies. But at a Senate estimates hearing last week, it was revealed that more than a year since the tender process opened, no outcome has been finalised, and officials declined to say how many tenders had been received, citing procurement rules. Opposition transport spokeswoman Bridget McKenzie told Capital Brief the policy had stalled completely, saying “Albo’s Armada is not just in dry dock, it is not even at the design stage”. The Maritime Union of Australia, a long-time supporter of the proposal, has also expressed frustration. Transport Minister Catherine King defended the process in a statement, saying proposals were being assessed through a “competitive, open and transparent” process. (Capital Brief)