Chapter 170: Bottom Line
Chapter 170: Bottom Line
“Yes, Robert. That’s also the reason I invited you tonight, isn’t it?” Since the other man had finally opened the topic, Eric straightforwardly brought everything into the open as well.
Robert Shaye gave a dry laugh, masking the awkwardness in his expression.
In this hidden exchange, he had already decided to admit defeat, yet he still insisted on circling around once more. Eric’s direct response immediately gave him the unpleasant feeling of being at a disadvantage again.
After taking a sip of the bitter coffee to steady his emotions, Robert finally spoke.
“Alright, Eric. Actually, I’m quite interested in cooperation between our two sides as well. Can you first tell me your terms?”
“You know, Robert, what I value is New Line’s distribution channels,” Eric said. “So my intention is to fully acquire New Line. The preliminary offer is 150 million dollars. Of course, the price is negotiable. And after the acquisition is completed, I can also give you the CEO position of the integrated Firefly company. You’re only fifty years old. You’re not planning to retire yet, are you?”
“I’ve already been my own boss for more than twenty years. Suddenly becoming an employee instead—even as CEO—doesn’t sound particularly attractive,” Robert Shaye said with a smile and a shrug before continuing, “Perhaps our two companies could merge instead, like MGM-UA. New Line has distribution channels, Firefly has excellent film content. If we merged, perhaps within a few years Hollywood would gain another giant studio called Firefly–New Line. What do you think?”
“And how do you think the shares should be distributed after the merger?” Eric asked.
Hearing Robert Shaye’s words, he secretly smiled to himself.
Firefly–New Line. Interesting.
But Firefly was Firefly. He had no intention of dragging a little tail behind the company name.
The New Line label would certainly remain, but only as a subsidiary of Firefly.
Upon hearing the question, Robert Shaye glanced at Eric before once again lifting his coffee cup and falling into contemplation.
In truth, he had already begun thinking about this issue from the moment he received Eric’s invitation to dinner.
Since Firefly had only existed for a little over half a year, its distribution ability was effectively zero, and its accumulated film library could practically be ignored. By normal standards, it should not have been worth much.
But the reality was that Firefly’s profitability was simply terrifying.
Even if Home Alone was excluded from calculations because it technically was not a Firefly production, Pretty Woman alone had already generated more than 100 million dollars in profit.
And if Running Out of Time reached 200 million dollars domestically and another 200 million overseas, then Firefly would receive at least another 80 million dollars in box office profit-sharing.
That was not even counting the fact that Robert Shaye had also learned Eric would still collaborate with Fox on two additional films, while simultaneously producing three more movies himself.
Home Alone 2 was guaranteed profit.
Sleepless in Seattle, personally directed by Eric and starring Tom Hanks, certainly would not lose money either.
The remaining three films reportedly all carried mid-to-low budgets under 10 million dollars. Given Eric’s reputation, they would surely make at least modest profits.
When everything was added together, if one only calculated theatrical profits, Firefly’s yearly earnings could potentially equal the combined box office profits of at least two major studios, reaching an astonishing 400 million dollars.
And the market value of a company was generally around ten times its annual profit.
For example, during good years, the Big Six studios each earned around 200 million dollars annually, while their market values generally hovered around 2 billion dollars.
As for Columbia’s current soaring valuation, that was completely inflated hype. Before news of Sony’s acquisition leaked, Columbia’s valuation had also been stuck around 2 billion.
As for New Line, among the six films it produced and distributed last year, only A Nightmare on Elm Street 4 generated more than 10 million dollars in profit. The remaining films together earned only several million more.
Adding videotape revenue and other peripheral profits, New Line’s total annual earnings were roughly 30 million dollars.
By that rough calculation, New Line’s market value should have been around 300 million dollars.
Of course, that sort of calculation merely gave outsiders a rough impression.
In reality, a company’s valuation could not truly be calculated that way.
New Line earning 30 million dollars last year was largely because it had enjoyed a particularly good year, while A Nightmare on Elm Street 4 had luckily become a major hit.
Meanwhile, the second and third Elm Street films had only earned slightly over 20 million dollars at the box office. After theater splits and production costs, those two films had barely made any profit at all.
Therefore, the professional auditing firm in the documents Eric received only valued New Line at around 150 million dollars, and that already included its film library, franchise rights, and distribution channels. The company’s unstable yearly profits were merely a small reference point.
But valuing Firefly was much more troublesome.
Up to now, Eric had only spent less than 10 million dollars renting office space and purchasing equipment. Yet in addition to that, Firefly also possessed the rights to Home Alone, Pretty Woman, half the rights to Running Out of Time, and several other film properties.
You could claim the company was worth 100 million dollars.
Or you could just as reasonably claim it was worth 1 billion dollars.
So when Eric asked Robert how much equity he wanted in the merged company, despite having considered the matter for several days already, Robert still could not immediately answer.
After thinking silently for a full five minutes, Robert finally lifted his coffee cup with his left hand while resting his right hand on the table and slowly raising three fingers.
The gesture itself clearly lacked confidence.
“Three percent?” Eric leaned forward slightly and asked curiously.
Pfft—
Robert Shaye immediately sprayed out a mouthful of coffee.
Fortunately, he turned his head in time and avoided spraying the table and Eric directly. However, because of the direction he turned, a few droplets still splashed onto the chest area of Aniston’s long dress.
The little woman, who had already been somewhat distracted, never expected such a thing to happen. She did not even have time to dodge.
Only after feeling slight dampness on her chest did she let out a startled cry and hurriedly grab a napkin to wipe away the coffee stains while simultaneously glaring at Eric in dissatisfaction.
She had no idea what exactly had happened. She only knew Eric had said something about “three percent,” and then her dress suffered collateral damage.
The restaurant’s service was extremely attentive.
Seeing the situation, a waiter quickly brought tissues while helping clean both the table and the floor.
Soon, everything was cleaned up, and the waiter quietly withdrew again.
“Terribly sorry,” Robert Shaye said while wiping his mouth and shirt with a napkin. After apologizing to Aniston, he turned toward Eric with obvious dissatisfaction in his expression.
“Eric, does the company I spent twenty years building really only deserve three percent equity in your eyes? If that’s truly the case, then what’s left for us to discuss?”
“Alright, I understand now,” Eric said. “You mean… thirty percent?”
Robert Shaye nodded.
“Over these years, I’ve accumulated some personal wealth through my business operations, so I’m not particularly interested in a cash acquisition. I hope the two companies can merge instead. And I want thirty percent of the shares.”
“That’s my bottom line.”