Chapitre 112: Chapter 112: Atlantis
In the second half of 2004, all of Hollywood was captivated by the acquisition battle for the veteran film studio MGM. The news about Sony and Time Warner competing for control over MGM continued to unfold.
At the headquarters of ETA (Endeavor Talent Agency) in Beverly Hills, Charles Capet came by to discuss Capet Pictures' plan to commission ETA for the acquisition of the Canadian independent distributor, Atlantis Films.
Atlantis was just a small Canadian independent distributor with limited value since its business concentrated only in Canada.
With ETA's help, the acquisition shouldn't be a big problem!
In Evelyn Capet's office, after discussing business, Charles naturally had a chat with his mother.
"Charles, Atlantis Films won't cost more than $10 million. It does have distribution personnel in major Canadian cities, but its copyright library isn't very valuable," Evelyn said.
Charles, sitting on the sofa and playing with a Rubik's Cube, smiled and said, "Acquiring Atlantis Films is also for future operations of a film studio in Canada."
"The company is shooting more and more movies overseas these days. The UK and Australia are a bit far; Canada's tax rebates are decent, and it's closer. I plan to build a studio in Toronto with at least ten soundstages and an outdoor filming area of no less than 50 acres."
Evelyn nodded. Operating a studio not only for their own use but also for leasing is indeed convenient.
"Charles, Sony has partnered with Doncaster, Pacific Insurance Fund, DLJ Capital, and other Wall Street investment institutions to bid $12 per share for MGM and is willing to assume all of MGM's debt. Time Warner has already pulled out; their highest offer was $10 per share!"
Charles stopped what he was doing and asked, "Is it an all-cash acquisition?"
Evelyn nodded. "Sony and Doncaster each put in $300 million. The remaining investment institutions contributed $1.1 billion, and JP Morgan provided a $1.2 billion loan guarantee."
"A total of $2.9 billion in cash, plus MGM's $1.9 billion debt, makes it a $4.8 billion acquisition deal!"
Charles held the Rubik's Cube in his hand, smiling slightly. "That gambling king did another great deal, huh? This is his third time selling MGM."
Las Vegas casino mogul Kirk Kerkorian had bought and sold MGM three times. Was MGM a film company or a casino resort group?
After all, Kirk Kerkorian's casino hotel group was called MGM.
"Kerkorian now owns over 70% of MGM. Ten years ago, it only cost him about $1.3 billion for the third acquisition. Evelyn admired him. MGM, in his hands, was like the toy Rubik's Cube in Charles' hands.
"Sony, along with other capitals, established MGM Holdings to take control of MGM. It's also for their battle over the new generation high-definition DVD format. Getting MGM's operating rights for $300 million is a great deal!" Charles set down the Rubik's Cube, now fully solved by him.
MGM's film library was invaluable. Sony could directly release high-definition Blu-ray DVDs, winning the format war against Toshiba's HD-DVD with content.
DVDs were indeed the most profitable segment of the film industry then, something Sony valued greatly along with the distribution contract for future James Bond movies.
"The Sony chairman will soon be replaced. The successor is the head of Sony's entertainment business, Howard Stringer, a British-American. Current president Nobuyuki Idei is stepping down soon," Evelyn explained.
"Howard Stringer has been in charge of Sony's American entertainment. The merger of Sony Music and BMG was his work," Charles noted. Recently, Sony Music and BMG (Bertelsmann) merged to form Sony BMG Music Group, each holding 50% equity.
"Teaming up with Wall Street to control MGM was also his persuasion. Otherwise, Sony wouldn't have a non-Japanese person as their president," Evelyn added. Howard Stringer had worked at Sony for many years with successful entertainment business management.
Charles nodded. The Japanese were quite exclusive. If Howard Stringer became Sony's chairman, he'd be the first foreign president.
"MGM had one of the MPAA seats, and with Sony now in control, the seven MPAA seats are down to six. What a pity!" Charles was regretful about this.
Evelyn smiled. "MGM was the last of the Big Seven independent distributors, and now it's gone."
"Charles, the only independent film distributors making waves now are DreamWorks and Lionsgate."
"Too bad DreamWorks, after losing DreamWorks Animation, is in horrendous debt. Without Jeffrey Katzenberg's management, can it rely on the semi-retired David Griffin or the greedy director Steven Spielberg?"
"It's no secret that Spielberg and Griffin are looking to sell DreamWorks to Universal," added Charles, shaking his head with some sarcasm.
Evelyn nodded. "DreamWorks and Universal have long collaborated. Selling to Universal would be a great choice!"
Charles shook his head. "But Universal's parent company is General Electric now. Jeff Immelt has a classic Wall Street financier mindset. GE Capital is GE's main revenue module now. With DreamWorks' high debt, how much return does it generate annually?"
"GE's board won't offer a high price. They aren't interested in properly managing an entertainment business!"
"Alright, I'm heading back to the company. These large acquisitions are still quite distant from me."
Charles said as he prepared to leave. Evelyn came over to hug her son, adjusting his tie with a smile. "Start with small companies. Atlantis Films is a good beginning."
Evelyn then saw Charles and his assistants off to the company gate.
Watching Charles and his two assistants get into a business GMC, Evelyn returned to her office.
"ETA will complete the Atlantis Films acquisition for us within a month. The time needed is mainly for assessing the value of Atlantis's Canadian film copyright library," said Dona Williams, holding the commission acquisition agreement.
Charles nodded. Back when CAA helped Sony acquire Columbia Pictures and helped Panasonic acquire Universal Pictures, they had done a good job.
For small acquisitions like this, Charles believed ETA wouldn't waste much time.
*****
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