Capítulo 170: Chapter 170: Bottom Line
[Chapter 170: Bottom Line]
"Yes, Robert, that's actually why I invited you here today, isn't it?" Since Robert opened the discussion, Eric took the opportunity to dive into the topic.
Robert Shea chuckled awkwardly, trying to mask the embarrassment on his face. He had secretly decided to concede, but with Eric's comment, he felt as though he was losing ground again. After sipping some bitter coffee to steady his mood, Robert said, "Alright, Eric, I'm actually quite interested in our potential collaboration. Can you share your terms first?"
"You know, Robert, what I value most is New Line's distribution channels. So, I plan to acquire New Line fully at an initial offer of $150 million. Of course, we can negotiate that price. Plus, after completing the acquisition, I can position you as CEO of Firefly once we consolidate. You're only fifty; you wouldn't want to retire, right?"
"I've been in this game for over twenty years, and suddenly being reduced to an employee, even as CEO, isn't exactly appealing," Robert laughed, holding up his hands in a shrug. "Maybe we could merge instead, like MGM-UA did. New Line has the distribution, and Firefly has top-notch movie content. If we merged, we could create another Hollywood giant called Firefly-New Line. What do you think?"
"What do you think the equity split should look like after the merger?" Eric asked, amused by the idea of Firefly-New Line. However, he wasn't keen on dragging along New Line's label; it would remain but only as a subsidiary of Firefly.
At the question, Robert glanced at Eric, then lifted his coffee cup thoughtfully. In truth, he had been considering this issue since he received the dinner invitation from Eric. Firefly, only a little over six months old, had zero distribution capability and an almost negligible film library, which meant it wasn't worth much. But the reality was that Firefly's profitability was incredibly impressive.
Even if Firefly's projects didn't yet count towards their reputation, one film had pulled in over $100 million in profits. If the domestic box office reached $200 million and the overseas earned the same, Firefly would net at least $80 million in box office split.
Furthermore, Robert had learned that Eric was set to collaborate with Fox on two films and had three more in production, including one to be directed by Eric with Tom Hanks on board, which would surely be a hit. The other three were reportedly low-budget in the $10 million range, which Eric's star power would likely ensure would yield a profit.
All in all, if Firefly's box office for this year was merely calculated based on profits, it could rival at least the combined profits of two major studios, reaching a stunning $400 million.
Typically, a company's market value was around ten times its annual profit. For example, the major studios could earn around $200 million in a good year, pushing their market value to approximately $2 billion. As for Columbia's soaring market value, it had been inflated; before news of Sony's acquisition, Columbia's value had also been around $2 billion.
For New Line, last year it produced six films, with only one making a profit of over $10 million. The others combined earned just a few hundred thousand, and considering home video and other peripheral earnings, New Line's profit for last year was about $30 million. This meant New Line's market value hovered around $300 million.
Of course, these calculations merely provided an approximate impression for outsiders. In truth, a company's market value couldn't be simplified like that. New Line's $30 million profit was a result of a banner year, while the second and third films barely grossed just over $20 million. After costs were deducted, they hardly earned anything. Therefore, Eric had seen that a reputable financial auditing firm had appraised New Line at $150 million, including its film library, franchise rights, and distribution channels as assets. The very volatile annual profit was only a small reference.
However, Firefly's valuation was a different beast altogether. Eric had barely spent $10 million in total for office rent and equipment, and with half the rights of various films, one could argue it was worth either $100 million or even $1 billion.
When Eric asked Robert how much equity he was looking for post-merger, Robert found himself stumped, despite having mulled over it for several days.
After five minutes of contemplation, Robert finally lifted his coffee cup to his lips with his left hand while raising three fingers with his right hand on the table, showing a hint of uncertainty.
"Three percent?" Eric leaned in, curiosity evident in his voice.
Pff--
Robert Shea couldn't help but spit out his coffee, thankfully turning just in time to avoid soaking the table and the still unsuspecting Eric across from him. However, since he turned away, a few droplets splashed onto Jennifer Aniston's elegant dress.
The young woman, already somewhat distracted, hadn't expected this. She didn't even have time to dodge, and only realized something was amiss when she felt a dampness on her chest. She exclaimed and grabbed a napkin to wipe the wet spot, casting a disapproving glare at Eric. She didn't understand what exactly had happened; all she knew was that Eric had said something about "three percent," and then her dress had met an unfortunate fate.
The restaurant staff was quite responsive. Seeing the scene unfold, a waiter promptly brought over some napkins, helping to clean the table and floor in the process. Once everything was tidied up, the waiter quietly stepped back.
"I'm truly sorry," Robert Shea apologetically wiped his mouth and the damp area of his outfit while addressing Aniston. He then turned to Eric with an expression of clear displeasure. "Eric, did you just say my twenty years of hard work is worth only three percent equity? If that's the case, what is there to discuss?"
"Alright, I get it. You mean... 30%?" Eric confirmed once more.
Robert Shea nodded. "I've built up a bit of wealth over the years, so I'm not inclined towards a cash acquisition. I want the two companies to merge, and I want 30% equity. That's my bottom line."
*****
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