章 586: Chapter 587: Vanishing
[Chapter 587: Vanishing]
Elisabeth and Julia walked out of the villa with breakfast, approaching the round table just in time to see Eric frowning slightly.
As she placed a breakfast plate beside Eric, Elisabeth quietly asked, "What's wrong?"
Eric moved his laptop, freeing up space, took a sip of the warm milk, and replied, "There were some minor issues with the acquisition negotiations over in New York."
Elisabeth let out a low "Oh," realizing that since this involved the acquisition talks with ABC, she shouldn't pry any further. Although she had no other intentions and wouldn't spill secrets she learned from Eric, she understood that her father would be more than happy if Eric's plans to acquire the other three networks fell apart. This meant that Firefly could likely continue its collaboration with Fox, so Elisabeth felt it was necessary to avoid crossing any lines.
However, Julia was unaware of Elisabeth's thoughts and didn't have such reservations. She sat down beside Eric and curiously asked, "What kind of issues?"
"ABC is worried that after the merger, Firefly's high debt could burden the company too much, so they're asking Firefly to reduce the proportion of bond issues and raise acquisition funds through an IPO."
Listening quietly, Elisabeth raised an eyebrow. Although she didn't know the detailed acquisition plans, she knew that if Firefly successfully acquired ABC, its market value would easily exceed $30 billion, while its long-term debt might be around $10 billion. When calculated, that only made for a 30% debt ratio, which for any major corporation is not considered high at all. In fact, such a debt ratio could have excellent tax benefits. She understood that ABC's demands weren't stemming from concerns over Firefly's debt load but rather aimed at weakening Eric's control over Firefly after the merger.
While Elisabeth quickly grasped ABC's intentions, Julia clearly didn't understand some of the financial terms Eric used. Nevertheless, she easily found her point of interest and asked, "So if you acquire ABC, how much debt will you have?"
"Adding the previous debts, it'll be around $10 billion."
Julia gaped, "That's a lot! I think... maybe going public would be better then."
Eric simply shook his head with a smile, choosing not to respond.
Elisabeth chimed in, "Julia, it's not like that. After the merger, based on Firefly's future market value exceeding $30 billion, $10 billion would only represent a 30% debt ratio. Many large companies have much higher ratios than that. ABC just wants to push Firefly to go public rather than to ease the debt."
"Ha, I don't really understand," Julia admitted. "But even if they paid back that $10 billion over ten years, isn't there interest to consider? Given Firefly's profits this year, even combined with ABC's, doesn't that mean..." Julia trailed off, realizing how unrealistic that actually sounded. If there were so many companies with higher debt ratios than Firefly making money, how could that be?
"Of course not," Elisabeth replied, unfazed by Julia's lack of understanding. Instead, she eagerly explained, "With a $10 billion debt and an interest rate of 5%, Firefly's first-year principal and interest payments could be around $1.5 billion. Of course, as the debt ratio decreases, that number would keep getting smaller. To break it down, the $1.5 billion initially would not come from profits but from the company's revenue as an operating cost. Just like this year, even though Firefly and ABC's combined net profits only totaled $1.5 billion, the total revenue from both companies was close to $20 billion. Plus, the $1.5 billion could help avoid taxes, since with North America's corporate income tax at about 35%, $525 million of that would've gone to the IRS, meaning Firefly only actually needs to pay back less than $1 billion in debt." By the end of her explanation, Elisabeth glanced at Eric with a smirk, thinking this would be amusing, "Of course, with such high debt, if Firefly's performance doesn't maintain high growth -- at the very least, doesn't stagnate -- you'll surely run into trouble."
Julia struggled to follow Elisabeth's rapid speech filled with numbers, focusing on the last line with worried eyes turned to Eric.
"No worries. If I go bankrupt one day, I can always live off someone else," Eric joked, reaching out to gently pat Julia's worried face.
Elisabeth rolled her eyes in annoyance at Julia pressing her cheek into Eric's palm, waving her hand dismissively as if shooing away a fly. "I can't stand you two."
...
After breakfast, Elisabeth hurriedly drove off to Century City for work while Julia followed Eric's instructions from last night and took Emma to meet with her accountant.
After finishing his meal, Eric called Jeffrey Katzenberg to discuss a few things before opening his email. Since acquiring Hotmail, Allen often didn't need to personally deliver documents to Eric. Many situations could be resolved via email, and the people around Eric had gradually gotten accustomed to contacting him this way.
After checking the emails that piled up yesterday, it was already after nine. Eric packed away his laptop and planned to head to Playa Vista to find a car when his mobile phone rang.
The call was from Amy Pascal. They chatted for a bit on the phone before Eric hung up.
...
An hour later, Eric arrived at a seafood restaurant in Venice Beach, driving a somewhat clunky white Chevrolet van.
Amy Pascal and Drew were already waiting there.
"Eric," Drew exclaimed, rushing over to hug him. Then, noticing the Chevrolet parked in the lot, she teased, "When did you buy this thing? Your taste really stinks." But as soon as she said it, she realized it might be a woman's car, grimacing slightly. After Eric greeted Amy Pascal, Drew pulled him toward the restaurant.
Since it was still early for lunch, perhaps due to prior arrangements, the three of them sat at the table where the server only brought Eric a cup of coffee before stepping aside.
Eric, not in the mood for coffee, pushed the cup aside and asked, "How many did we get?"
Amy Pascal pulled a folder from her bag and handed it over. "Three. The rights holders for Spider-Man, The Fantastic Four, and The Hulk all agreed to the transfer agreements. However, the 21st Century Film Company, which holds the rights to Captain America, insists on a 30% stake in Night at the Museum and the same for any sequels. They won't budge, so whether we agree to this depends on you. But Eric, I wouldn't recommend it. Even though we'd have the rights secured, the other three companies would certainly be quite unhappy. They all only got 20% stake in the investment, and the sequels only 10%. Oh, by the way, all of their choices are for Night at the Museum, that effect-heavy film."
Listening to Amy explain, Eric skimmed through the rights transfer contracts in his hands. Aside from Spider-Man, the other two Marvel superheroes hadn't performed well in adaptations from their original universe, but securing just Spider-Man would suffice. If he couldn't acquire the rights to Captain America in the future, Eric didn't believe that 21st Century Film Company could pull off anything remarkable without other superheroes helping, and once Marvel secured their capabilities, the rights to Captain America would inevitably revert over time.
After looking through the three transfer agreements, Eric asked, "Are there any others?"
Amy Pascal glanced at him and said with a smile, "There's Blade, which New Line bought a few years ago. The rights will be up at the end of this year, so if Firefly wants to keep the copyright, we'll need to renegotiate with Marvel or produce the film. Other than that, not much else is left. Oh, I found out in my research that Marvel is in talks with Universal about transferring the X-Men rights. After losing seven main writers last year, Marvel's condition has been even worse this year, so they are desperate to sell some rights to secure operating funds."
Other companies were manageable, but Universal was a different story.
Eric found the situation troubling. With Michael Eisner's shrewdness, as soon as they moved on this, Universal would surely up the ante. Attempting to snatch this would entail overpaying substantially, which certainly wouldn't be easy.
"Oh, of course, it's doable," Amy seemed to sense Eric's concerns. "If we want to acquire the X-Men rights, it wouldn't be too hard. Didn't you hear? Michael Eisner has been having health issues lately, which may even be life-threatening. He's been inquiring about heart surgery options, and right now, many of Universal's operations are being run by Eisner's assistant. I've heard he's looking to place his friend Michael Ovitz as Universal president."
Eric suddenly remembered that in the original timeline, Eisner did indeed face a significant health scare in 1994, though he wasn't sure of the specifics. He only knew that leading up to the surgery, he seemed to have been preparing for the possibility of dying, having designated a successor for Disney.
"If we can snag it, let's go for it, but let's not make a big noise about it."
"I understand," Amy nodded. "Marvel is in dire need of funds, so as long as we offer a high-enough price, they'd definitely choose us." Then, she suddenly added, "By the way, Eric, if you're optimistic about Marvel's superheroes, why not just buy the whole Marvel comic company right now? With their current situation, you might not even need to use up to $200 million."
Eric gently shook his head with a smile, saying, "It's not the right time yet. Just make sure you secure the X-Men rights."
Amy Pascal didn't quite grasp what Eric meant, but she didn't press further, nodding. "Since we've already secured Spider-Man, The Fantastic Four, and The Hulk, when do you plan to kick off these projects?"
"Let's hold onto them for now," Eric replied. "We should wait a few more years for the effects technology to develop. If we made them now, even if we could achieve the desired effects, the production costs would be astronomical."
Amy agreed, realizing this concern while negotiating for the superhero rights. Compared to DC's Superman and Batman, making Marvel's superheroes movies was far more challenging to showcase those super abilities effectively in movies than with DC's heroes. It certainly wasn't the right time to delve into superhero films.
Once they finished discussing this matter, Amy finally got to the real reason for her call to Eric: "Kevin Costner and his agent will arrive at noon. Eric, take a look at this script first."
As Amy spoke, she pulled out a script from her bag and handed it to Eric.
Upon glancing at the script's title, Eric's eyes narrowed slightly.
The inertia of history was indeed quite powerful.
Boldly written across the script's cover page were the words: Waterworld.
The scapegoat for Kevin Costner's career decline, the disaster of Waterworld, had left him struggling to regain his standing. Once on par with stars like Tom Cruise and Mel Gibson, after Waterworld's flop, Costner faltered. While Tom Cruise remained a box office draw with the Mission Impossible franchise, the former Oscar-winning director and lead actor, Costner, found himself reduced to playing Superman's father in a supporting role in Man of Steel.
"When we invited Kevin Costner to appear in Mission Impossible, he was still prepping for this movie. After I read the script, I felt it was fantastic, and Kevin hasn't closed a deal with any other companies yet. So I thought, Eric, why don't you acquire this film? I have a feeling it could be another Mad Max," Amy said, her tone brimming with excitement, though she quickly shifted back to a more casual tone, laughing, "Okay, Eric, just read the script first. We can talk more once we're done."
*****
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