Bab 183: Chapter 183: Integration Plan
Simon and Jack Welch had established a basic transaction framework for New World Entertainment, with detailed contract terms still requiring further negotiation.
With the tacit approval of New World Entertainment's major shareholders and General Electric, Daenerys Studios began to rapidly intervene in the company's operations over the following days. They requested that New World Entertainment's CEO, Robert Rem, temporarily halt all film and television project productions and distributions, with any expenditure over $50,000 requiring Daenerys Studios' approval.
Due to the constant paparazzi following Simon, news of his meeting with Jack Welch and others appeared in the newspapers the next day, and the media quickly pieced together the sequence of events.
However, this time there wasn't a capital rush like at the beginning of the year.
Too much had changed in half a year.
At the beginning of the year, just after Simon's sudden wealth from stock index futures trading was exposed, he was seen as an easy target. Additionally, the Hollywood writers' strike had not yet occurred, and New World Entertainment's crisis was not as severe as it is now.
Now, due to the Hollywood writers' strike halting New World Entertainment's heavily relied upon television production business, the already financially troubled company's operations worsened further. Simon's actions at the beginning of the year also made his stance clear.
Hence, the transaction proceeded smoothly.
The day after Simon's meeting with Jack Welch was July 4th, Independence Day.
After a four-day holiday, Daenerys Studios, New World Entertainment, and General Electric jointly announced the transaction, officially making it public.
Daenerys Studios planned to acquire all shares of New World Entertainment from General Electric through a debt-to-equity conversion for $250 million. Through this transaction, General Electric would recover $225 million, and New World Entertainment's original shareholders would receive a total compensation of $25 million, equivalent to one-sixth of the share price before the transaction.
While some shareholders expressed dissatisfaction with the transaction, it was clear to all parties that this was the best outcome.
Without this transaction, New World Entertainment would have either gone bankrupt or sold assets to repay debts, leaving shareholders with nothing.
With the deal agreed upon, Simon had James Rebhorn organize a team for an asset and financial audit of New World Entertainment.
Many companies accumulate hidden debt through overstating operational income or delaying payments, especially those in poor operational conditions. Acquirers ignoring this risk often end up bearing these expenses post-transaction.
Hidden debt is even more common in Hollywood's complex accounting systems.
Simon's choice not to purchase General Electric's debt directly, but to let them convert it first, was to avoid sudden hidden debts from New World Entertainment catching Daenerys Studios off guard. By having General Electric convert the debt first, the risk remained with them and New World Entertainment until a formal contract was signed.
The preliminary audit work would take about a month, plus financing issues for acquiring New World Entertainment meant Daenerys Studios might only take over the company in August.
In this busy time, a new week passed.
Thanks to the four-day Independence Day holiday, North America's total box office from July 1st to July 7th broke the $100 million mark, reaching $117 million.
Paramount Pictures' "Coming to America" starring Eddie Murphy opened with $36.15 million from 2,065 screens, becoming the highest-grossing film of the summer's first week. Disney's "Who Framed Roger Rabbit" nearly maintained its opening week's earnings in its second week, supported by rave reviews and the holiday, grossing an additional $21.34 million for a two-week total of $42.99 million.
The dark comedy "A Fish Called Wanda" starring Sandra ranked third in its opening week, grossing $13.96 million. Although it didn't start spectacularly, relative to its $8 million production budget, the film was set to recover all costs by next week, supported by strong reviews and buzz.
"Pulp Fiction" slid to fourth place in its fifth week, with a 17% drop in box office, adding $12.53 million for a five-week total of $95.79 million, poised to break $100 million the following week.
Tom Hanks' "Big" entered its fifth week, grossing an additional $9.24 million. Despite never claiming the top spot, the film had quietly accumulated $55.46 million, showing strong performance.
On July 8th, four new films from major studios debuted, but all essentially failed at the box office, with none breaking into the top five.
Additionally, "Basic Instinct" began its final week of sprint promotion before release.
Meanwhile, ABC quickly resumed talks with Daenerys Studios after just a week of standoff, as Simon predicted, lacking the confidence to drop a show that could earn the network $1 million per episode, especially given its triple the number of episodes per season compared to traditional dramas.
Negotiations restarted with Daenerys Studios standing firm on a $2 million per episode price but made some concessions in other areas, agreeing to provide ABC with 15 additional episodes before the fall season to compensate for the strike-induced program shortage.
ABC agreed to pay Daenerys Studios $30 million for these additional 22 episodes, primarily to secure more viewers before the fall season, a move that led to their swift compromise. In contrast, NBC, which also quickly signed a contract with Daenerys Studios for "Survivor," couldn't achieve the same effect.
"Survivor" was contracted under similar terms to ABC, with Daenerys Studios receiving a flat buyout of $1.2 million per episode for the first season. After airing, both parties could renegotiate prices based on viewership.
Simon preferred a revenue-sharing deal but was firmly rejected by NBC, which, like Hollywood studios, preferred not to disclose their financials, maintaining an opaque accounting system.
"Survivor" was planned for a 13-episode first season, much costlier than "Who Wants to Be a Millionaire" but with a potentially longer screen life and higher annual net income for Daenerys Studios if successful.
In summary, both reality shows were like low-cost, high-revenue blockbusters, rare and invaluable. For long-term TV business growth, Daenerys Studios needed to produce various mainstream programs.
In Santa Monica, at Daenerys Studios headquarters on July 12th, Simon's office hosted Robert Rem, New World Entertainment's CEO. Despite being seated, Rem's stature was noticeably tall, over 1.9 meters.
With the transaction set, Rem had been proactively in touch with Simon, who had thoroughly researched Rem's career through connections.
Rem, 53, started in the film industry as an usher at 16 and had over thirty years of experience in film production and distribution, leaning towards movie distribution, which Daenerys Studios needed.
Rem saw this opportunity and was active, knowing his chances of leading a major studio were slim if he left New World Entertainment post-acquisition. Working as an independent producer or receiving offers from second or third-tier film companies couldn't compare to the rapidly growing Daenerys Studios.
Simon intended to keep Rem but needed to confirm his willingness to work under Amy Pascal. If Rem wasn't content with a secondary role, Simon would regretfully let him go.
Rem's visit was mainly to deliver documents on New World Entertainment's various projects to Simon.
After acquiring New World Entertainment from Roger Corman in 1983, Larry Koopin and others retained rights to all films produced before 1983. In recent years, through productions and distributions, New World Entertainment quickly accumulated nearly a hundred film and TV rights.
Simon was most interested in the company's TV shows, with several high-rated dramas announced last year, now halted due to the writers' strike. Without Daenerys Studios' acquisition, New World Entertainment would likely cancel most projects due to financial issues.
As for movies, following Corman's style, New World Entertainment produced mostly low-budget B-movies, with many directly released on video. This year's production plan had dwindled to three, with several uncertain projects in development.
After skimming the documents, Simon discussed integrating New World Entertainment into Daenerys Studios, forming Daenerys Entertainment, and maintaining staff except Rem, who was open to being Pascal's deputy but wished to report directly to Simon, bypassing her authority.
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