Chapter 381: Termination Fee

After hesitating for a moment, Lou Wasserman said, "Simon, completely waiving the termination fee is impossible. The board wouldn't agree to that, but we can discuss the specific amount."

Simon didn't want to waste too much time on this issue, so he proposed, "Let's set it at 50 million dollars, a fixed amount."

To most people, 50 million dollars would be a vast and unreachable sum, but for Simon at this stage, it was not a significant amount.

The termination fee negotiated between MCA and Panasonic was 2.5% of the final transaction amount. Based on MCA's recent market value near 6 billion dollars, Panasonic would need to pay 150 million dollars if they withdrew, which was roughly equivalent to half a year of MCA's net profits.

Wasserman had considered setting Daenerys Entertainment's termination fee between 1% to 2%, which was already a substantial concession. Hearing Simon only willing to offer a fixed fee of 50 million dollars, he shook his head and said, "Simon, that amount is too low."

Simon insisted, "You want me to get involved quickly, Lou. This is the price that has to be paid."

Wasserman thought for a moment and then said, "Then, we must go public with this early."

Simon shook his head, "No, after signing the intent agreement, Daenerys Entertainment will initiate a feasibility study for the acquisition of MCA. We won't actually start the acquisition immediately."

Wasserman's mouth twitched slightly. A feasibility study—who would believe that Daenerys Entertainment hadn't even completed this preliminary work yet? However, since everyone understood it was just a pretext, Wasserman did not argue.

After further negotiation, Simon grudgingly raised the termination fee to 60 million dollars, roughly 1% of MCA's current market value. Daenerys Entertainment would sign an intent agreement with MCA within a week to assess the feasibility of acquiring MCA. MCA would need to actively provide the necessary internal assets and financial data.

Although this matter needed to be kept confidential from the public, MCA could inform Panasonic that Daenerys Entertainment was officially entering the bidding.

After personally escorting Simon out, Wasserman returned to his office where MCA President Sid Sheinberg was waiting. Seeing Wasserman nod, Sheinberg knew Simon had agreed to enter the fray and asked, "Lou, did you discuss the company's management rights with Westeros?"

Three years ago, after a serious illness, Wasserman had shown intentions of retiring, which was also why he agreed to sell the company he had controlled for decades.

However, power is a difficult thing to relinquish, especially the more deeply one is involved.

Over the years, as Wasserman's health improved again, his thoughts of retirement gradually receded. Maintaining the current management's control over the company was a crucial part of the acquisition talks with Panasonic.

Compared to the 77-year-old Wasserman, the 55-year-old Sheinberg in his prime was even less willing to give up his power.

Wasserman shook his head and slowly sat down behind his desk, saying, "A friend in Washington called me yesterday morning. He said Ovitz and others are trying to block Daenerys Entertainment's acquisition of MCA. I asked Ovitz about it this morning, and he admitted it."

Ronald Reagan, who had once been a signed actor under MCA, hence Wasserman also had good connections in political circles.

Sheinberg was surprised by the news and temporarily forgot his initial question, reflexively saying, "We can't let Ovitz sabotage this acquisition."

"Of course," Wasserman gestured for Sheinberg to sit down across from him and continued, "I've already warned him. However, if it comes down to choosing between Panasonic and Daenerys, I would still prefer to sell MCA to Panasonic. Do you understand why?"

Sheinberg thought for a moment and then quickly nodded, "If the company is acquired by Daenerys Entertainment, Westeros is likely not going to keep us in charge of MCA."

"Not likely—definitely won't," Wasserman corrected, "Once Westeros takes over MCA, he will definitely integrate Daenerys and MCA. Our company's operations complement those of Daenerys very well. Westeros has built a very competent management team over the past few years; he won't keep us."

Sheinberg quickly grasped Wasserman's strategy.

Wasserman's push for Daenerys Entertainment to join the bidding could force Panasonic to raise their offer.

Then, at the right moment, Ovitz would act to push Daenerys Entertainment out of the race, allowing them to sell MCA to Panasonic smoothly. Although the shareholder would change, the management would still remain in their hands.

Wasserman, seeing the understanding on Sheinberg's face, added somewhat

 solemnly, "And besides, Hollywood has always been ours. Westeros, no matter what, is an outsider. I don't believe the other majors would simply give up and let Daenerys Entertainment expand because of a movie or two."

Here, 'ours' naturally referred to the Jewish community.

The Hollywood majors, now possibly including Daenerys Entertainment as a new 'Eighth Major,' were predominantly controlled by Jewish executives regardless of who the hidden shareholders were. Lou Wasserman, Sid Sheinberg, Steve Ross, Barry Diller, Sherry Lansing, Peter Guber, and even Amy Pascal, to name a few.

Thus, the idea that Hollywood is a Jewish Hollywood was virtually uncontested.

The Jewish community controlling Hollywood would naturally resist a non-Jewish person amassing more and more power.

Simon Westeros, with his unclear origins and background, was precisely such a person. Although Westeros might have had a surname that could indicate his ethnic lineage, no one knew if it was authentic, thus no one could be sure of his racial background.

In a traditionally conservative Western country, this issue was always taken very seriously.

The unconfirmed rumors that every American president has blood ties with the British royal family to some extent is a testament to this concern.

Simon Westeros's rise was so rapid that no one could ignore it any longer. Although he hadn't shown any tendencies of sidelining Jews in his management of Daenerys Entertainment, he was not Jewish, or at least he hadn't publicly acknowledged being Jewish.

For this matter, Hollywood's Jews might not know much about Eastern culture, but they very much understood a universal truth.

Those not of our kind, have a different heart.

Sheinberg didn't find anything wrong with Wasserman's words and asked, "Lou, what exactly does Ovitz plan to do?"

...

Unaware of Wasserman's thoughts, Simon returned to Daenerys Studios and instructed Amy and others to officially begin contact with MCA.

Signing the intent agreement quickly not only would fix the 60 million dollars termination fee but would also officially allow Daenerys Entertainment to request some previously inaccessible corporate internal assets and financial data from MCA, aiding the acquisition team to adjust the initially planned acquisition strategy appropriately.

After finishing the meeting with Amy and the others, Simon returned to his office where his assistant brought in a document.

"This is the information from New York regarding David Melrose's bill to restrict foreign enterprises from acquiring American assets, which will be formally submitted to Congress next week. Also, we've contacted The New York Times, The Los Angeles Times, and The Washington Post. They will follow up on reporting this bill."

Simon took the folder from his assistant and started reviewing the documents.

David Melrose was the U.S. Congressman he had met at the Hearst party.

Although the split with the Hearst family was not amicable, and Simon did not believe Melrose's bill would gain Congress's support, he still instructed James Rebould to contact him and had Westeros's funded Schlapp Consulting follow up on the matter, helping to publicize Melrose's cause.

As long as it could put pressure on Panasonic's acquisition of MCA, it was worth it.

Furthermore, this cooperation would allow Daenerys Entertainment to establish a connection with Congressman David Melrose. Networks are always built gradually through reciprocal actions.

Because of the ample preparations for the MCA acquisition, it only took a weekend for Daenerys Entertainment to quietly sign the intent agreement with MCA.

Although MCA did not leak the news to the media this time, influenced by Daenerys Entertainment's formal entry, Panasonic withdrew their previous offer last week and began re-negotiating with MCA.

This change ensured that the outcome of MCA's acquisition would be delayed until at least the end of October, exactly what Simon wanted.

With this matter settled, Simon flew to Melbourne on the new Monday of October 15th as planned.

Spending several days immersed in the Melbourne suburb's burgeoning studio with Jane de Bont and others, Simon was very satisfied with most of the dailies shot by de Bont, but still found several scenes needing reshoots, some for technical reasons and some due to dissatisfaction with the shot's effect.

However, the reshoots were not started immediately but were scheduled for three months later, in January of the next year.

By then, the rough cut and special effects shots of "Batman: The Dark Knight" would mostly be completed, allowing for more precise confirmation of reshoot details to save on the budget.

Thanks to the success of the first installment, there was technically no budget limit for "Batman: The Dark Knight," but Simon always paid close attention to this issue. With strict and detailed preliminary planning, even including about two weeks of reshoots, the project's final budget could still be kept within the planned 80 million dollars.

As Simon was in Melbourne, Panasonic, after urgent deliberation, submitted another offer to MCA, raising the overall acquisition price to 6.5 billion dollars,

 matching the transaction price Simon remembered.

Probably due to the inevitable leak of Daenerys Entertainment's formal entry, MCA's stock price also saw a noticeable rise that week.

At this rate, MCA's market value exceeding Simon's planned upper limit of 7 billion dollars was merely a matter of time.

The only consolation was that, compared to Columbia Pictures' billions in debt, MCA, which had always been well-managed, had almost negligible debt ratios. Although it wasn't debt-free, it was mostly short-term operational liabilities like accounts payable and notes, without substantial bank loans.

In the outskirts of Melbourne at the Johnston family estate.

It was October 20th, Saturday, and Simon was planning to return to Los Angeles the next day. He came to have dinner with everyone since Janet hadn't accompanied him to Australia due to some issues in North America.

As always, it was a large family gathering: Anthony Johnston's family, Norman Johnston's family, and recently engaged under the old man's urging, the youngest Johnston, Patrick, with his fiancée Sarah Kinston. Veronica also made it.

After dinner, Simon, the old man, and the two eldest sons gathered in the study. Patrick felt that as a Johnston man, he should also have the right to listen in, but a stern look from the old man quickly silenced him.

"Initiating acquisitions of two companies simultaneously might avoid some market frenzy, but Simon, have you considered the subsequent financial strain? I mean, not just the future repayment pressures but also the capital needed for further development of the two companies, especially Bell Atlantic. The telecom industry requires huge investments to expand. Although it's just a regional telecom company, if you want to develop emerging internet access services, just the infrastructure investment would be in the billions of dollars, right?"

In the study, Raymond Johnston was clearly well-informed about Simon's recent moves and started with a question that showed his skepticism.

Simon had naturally considered these issues.

With the Westeros system's current accumulation, relying on Daenerys Entertainment's profits over the next few years, planned sales of some tech stock assets, and the cash flow from the two target companies themselves, supporting the debt repayment for the next three to five years would not be a problem.

Looking further ahead, after next year's Gulf War, the American economy was expected to recover. The various assets held by the Westeros system would rapidly appreciate in value over the next few years.

In memory, by 1995, Microsoft and Intel's market values would each reach about 50 billion dollars.

With the Westeros system's 20% and 15% stakes in Microsoft and Intel respectively, by then, just the value of these stocks was expected to reach 17.5 billion dollars. If necessary, Simon could alleviate his financial pressure by cashing in some of these assets.

After outlining his plans, the old man's brows furrowed even deeper, "Relying on the American economy to improve is just foolish. Bush isn't a president who cares about the domestic economy. He's still planning to drag the United States into another war. Look up what the US economy was like during the Vietnam War. If he gets re-elected, the economic situation will only worsen, not improve."

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