Chapter 427: Poison Pill

[Chapter 427: Poison Pill]

When news broke that Cutthroat Island had suffered a staggering loss of $120 million, the impact hit Disney hard. Although only about $70 million of that loss belonged to Disney, the fallout was far worse than the $100 million Disney incurred across multiple films during the previous summer. In just three days, Disney's stock price dropped by 11%, shrinking its market value from $3.8 billion before Cutthroat Island's release to $3.45 billion.

This situation sparked a flurry of discussions and reflections in the media surrounding the pros and cons of big-budget films. Reporters conducted a detailed comparative analysis between Cutthroat Island and Terminator 2, highlighting the stark contrast between the two films -- one a box office disaster and the other a resounding success.

As these discussions evolved, they began to touch upon the numerous films produced in recent years with budgets exceeding $50 million. Naturally, the attention also fell on Eric's ongoing production, Twister, and Spielberg's slated project, Hook. Both directors had become the most successful in Hollywood over recent years, with budgets for their respective films also surpassing $70 million.

By the time Terminator 2's opening weekend figures were released, Eric had already completed filming for Twister. When he heard that Cutthroat Island barely managed to surpass $20 million at the box office, he felt deeply disappointed -- "the miracle" simply did not occur.

However, he wasn't entirely surprised; he knew that Carolco, an independent production company, was no match for Disney, one of the industry's Big Seven. Additionally, because Carolco had faced considerable pushback from the majors, it accounted for the pitiful $9 million that Cutthroat Island earned from its $90 million investment. Eric lamented that the $120 million loss from Cutthroat Island was not solely borne by Disney; otherwise, acquiring Disney afterward would have been much smoother.

After wrapping Twister, Eric remained in Oklahoma for several days to handle some loose ends before heading back to Los Angeles with a few key collaborators.

...

While still far off in Ponca, Eric began sensing the media frenzy triggered by several summer releases. Upon arrival in Los Angeles, he and Jeffrey, Joanna, and others were immediately greeted by dozens of journalists who had been waiting for some time, effectively blocking them in the arrivals hall.

Seeing the flurry of flashing cameras and reporters desperately reaching for their tape recorders, Eric worried the situation might spiral out of control. He quickly raised his hands and gestured for calm.

Initially fearing Eric might bolt and eager for a statement, the group of reporters quickly quieted down, understanding he had agreed to entertain their questions.

"Folks, I'll stick around to answer a few questions, but after a few hours on the plane, my companions here are quite tired. Can we let them leave first?"

Unexpectedly, Eric posed this question, and the crowd exchanged confused glances. He didn't seem to expect a definitive response, instead signaling to Jeffrey and others before indicating for his bodyguard to part the crowd. The reporters, noticing Eric remained where he was, smartly opened a path.

As Jeffrey and Joanna climbed into a waiting car, Eric clapped his hands together, "So..."

The reporters quickly erupted back into a chaotic buzz.

"Hold on, one at a time," Eric said, pointing to a woman reporter dressed in a black suit. "You first."

The female reporter stepped forward excitedly but was held back by a bodyguard. She had to shout over the crowd, "Mr. Williams, it's rumored that you were the first to notice the script for Cutthroat Island. What's your take on the film's disappointing box office for a picture costing over $100 million?"

Having prepared in advance for this type of question, Eric knew he could not admit he had stepped into a pitfall. Thus, he responded with a grave demeanor, "Cutthroat Island was originally a great concept. I even envisioned turning it into a trilogy. Unfortunately, Disney went astray in the production process and ruined this promising story. All I can say is that it's regrettable."

Before Eric had fully finished his sentence, the female reporter seized the opportunity to ask, "Can you share your production vision?"

"Sorry, I can't disclose that. Next, this gentleman."

The named reporter immediately jumped in, "Mr. Williams, since you had a vision for Cutthroat Island, would you consider remaking the series in the future?"

"The film's failure has already tainted audience perceptions." Eric shook his head. "Let alone a remake, I doubt anyone will dare to produce a pirate film for at least the next decade."

"Not even you?" the reporter pressed.

Eric nodded, "Yes, I wouldn't either. Cutthroat Island's failure dealt a crushing blow to the pirate genre. While I'm not afraid of failure, I don't want to experience it so soon. Next question."

A black-haired reporter stepped forward, raising his recorder higher. "Mr. Williams, it seems you've experienced some failure. I've heard the Hot Shots! series was a script you personally selected and invested in."

Eric flashed a smile. "I did select the script for the first Hot Shots! movie and participated in some of the investment. But I had nothing to do with the second film. I didn't even see the script; you can check that out."

"Didn't Ms. Connelly show you the script?" a small reporter chimed in eagerly, prompting everyone's attention to shift towards Eric, waiting for his answer.

Eric, fully aware that this question was an attempt to probe his relationship with Connelly, kept his smile but was short with his response: "No, next."

"That's the last question; I'm pressed for time."

As the reporter prepared to speak, Eric added that note, prompting him to rethink. After a moment, he asked, "Mr. Williams, with Toy Story and Terminator 2 achieving such impressive results, will you take this opportunity to list Firefly?"

"Not likely. Firefly's cash flow is quite strong, eliminating the need to raise funds through an IPO. And if we were to list, maintaining stock prices and investor confidence might force us to make some rash decisions contrary to the company's development strategy. That would be detrimental, so I prefer Firefly to continue developing freely without external investor interference."

Having answered that question, Eric nodded to the crowd and, surrounded by his bodyguards, made his way through the gathering journalists toward the exit. Although Eric hadn't said much, his responses provided enough material for the reporters to create a solid article, allowing him to leave Los Angeles airport relatively unscathed.

...

"The trilogy, huh? You just couldn't pass up the chance to annoy Michael Eisner," Chris Hansen, who had flown in from New York the next day, remarked upon seeing Eric, evidently having seen the reports on Eric's interview from the previous day.

Eric shook hands with Chris, walking alongside him towards the Liberty City Manor. "Cutthroat Island pulled in $20 million; that's way more than I imagined. Of course, I had to vent a little."

"$140 million invested, and after seeing a $20 million final tally, I felt a chill run down my spine -- even you think that's a lot."

"Too bad part of that loss was taken by Robert Shea," they said as they entered the mansion.

Seated by the glass curtain wall overlooking the sea from Liberty City, Chris observed as Eric brewed coffee at a nearby bar, saying, "You're still alone; doesn't this place feel a bit empty?"

Carrying the coffee pot, Eric approached and filled both their cups, replying, "It's all about the preference; I like this vibe."

Chris took his coffee and eyed Eric. "I don't know if it's just me, but even though we haven't spent much time together, I feel like there's always a veil separating you from the rest of the world. You excel at interpersonal relations, your social skills far exceed what one would expect for your age, yet you always seem like a droplet of oil in water -- close to everything but reluctant to blend in."

Eric paused, choosing not to argue, and smiled. "You really are quite observant."

Surprised by Eric's nonchalant admission, Chris continued, "Eric, that's not a great sign; if it continues, it could lead to some form of mental fragmentation."

"What are you, a psychology major?" Eric questioned.

"I took a psychology elective; many finance students do, as it helps analyze opponents or clients more thoroughly."

"Forget that, Chris. Let's focus on business. Don't worry; I'm definitely not on the brink of any mental breakdown, but I also don't know how to explain it to you."

Chris paused, then said, "Alright, but Eric, you should know we all care about you. My father, me, Drew, and... the women in your life. If there's anything you feel like sharing, any of us would be great listeners."

Eric thought to himself, how could he share his secret? Not even with Drew, he couldn't imagine how she would react if she ever learned the truth.

After Chris made that comment, he moved directly to the main topic: "Let's talk about acquiring Disney."

Pulling out some documentation he'd brought, Chris handed Eric a copy. "Disney's latest market cap sits at $3.43 billion, with liabilities of $2.07 billion. So far, I've secured a total of 11% of Disney shares through various companies and agents, totaling $376 million, and Disney's floating share is approximately 24%. So, there's still room for more acquisitions. The Disney Board comprises 16 members, including Michael Eisner, and members are re-elected every year. If our amicable buyout offer is rejected, we can secure two board positions through this year's elections and further stock acquisitions, thus giving us a stake in Disney's management."

Eric replied, "What potential obstacles do you see we might face during this acquisition, aside from financial ones?"

Chris smiled, "That's precisely what I wanted to address. Some info I collected surprised me -- after the hostile takeover attempt in 1984 that left them $300 million in the hole, it seems Disney hasn't learned a thing. They don't even have a standard poison pill agreement."

"Poison pill?" Eric asked, confused.

Chris thought for a moment and explained, "A poison pill is a preemptive agreement drafted by the target company to prevent hostile takeovers through stock dilution. If a hostile bid occurs, the agreement gets triggered. When a competitor starts purchasing stocks aggressively, the shareholders of the target company can dilute their ownership by issuing new shares. This strategy can elevate the acquisition cost astronomically -- like a poison pill that makes potential suitors reconsider. At least 2,000 public companies in North America have poison pill provisions, and I was astonished to find that Disney does not."

After hearing Chris's explanation, Eric chuckled, "In short, that's quite a boon for us, isn't it?"

"Absolutely," Chris said as he released his grasp on another page of materials. "However, despite Disney's underwhelming performance in recent years and the tremendous loss Cutthroat Island recently incurred, we must remember that Michael Eisner is the one who single-handedly pulled Disney from the depths of despair. Over the past seven years, Disney's market value has doubled under his leadership. At least half of the shareholders still have confidence in him. Therefore, our significant hurdle in this acquisition remains the existing management at Disney."

Eric realized that Chris was spot on. From his scattered memories, he knew that the major divergence between Disney shareholders and Michael Eisner likely emerged after 1996, when Eisner stubbornly acquired ABC, resulting in a surge in debt and hefty losses for Disney in the subsequent years. Prior to that, even though Eisner could be headstrong and self-serving, surrounding himself with sycophants on the board and leveraging the compensation committee for personal gain, Disney had been thriving, and shareholders had tolerated those issues.

Eric, on the other hand, couldn't afford to wait until 1996. By then, Disney's worth would likely have skyrocketed beyond reach.

Chris, unaware of Eric's internal deliberations, continued, "Once Disney agrees to an amicable buyout, everything will get simpler. However, I doubt Michael Eisner will agree to relinquish control of the board. There's over a 70% chance we'll have to take a second route, so it's crucial we prepare for the various obstacles that might arise."

*****

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