Chapter 428: Golden Parachute

[Chapter 428: Golden Parachute]

By five in the afternoon, the sun had begun its descent, casting a magnificent orange hue across the horizon where the sea met the sky outside the glass curtain walls of Liberty City. Eric and Chris remained in their seats, seemingly unmoved the entire day.

It had been six months since Eric made the decision to acquire Disney. Throughout that time, in addition to secretly acquiring Disney stock, Chris had conducted extensive research on the entire Disney Group. This included probing into the shareholders, the creditors, and their attitudes towards Disney's management, alongside detailed data on various Disney assets. The cost of this research had already run into the millions, making Chris perhaps the most knowledgeable person about Disney at that moment.

For most of the day, Eric played the role of listener, occasionally asking questions that Chris patiently answered.

As the sun finally dipped below the horizon, they wrapped up their discussions. Chris concluded with, "Cutthroat Island has just left theaters, and given the enormous losses, now is the worst time for Disney's shareholders and creditors regarding management. It's the best opportunity for us to initiate our acquisition. We need to make an offer within a week, which gives us time to consolidate the scattered Disney stocks we hold and form an acquisition team. Oh, I almost forgot to mention..."

At that moment, Eric held a listing of films that Disney planned to release in the latter half of the year and raised his head to ask, "What's that?"

"The folks at Firefly Investment Company simply don't have enough manpower to form a professional acquisition team. I was thinking about collaborating with Morgan Stanley. You know I have some connections there, and they already have a corporate merger team that can handle everything from asset evaluation to legal matters and pricing negotiations."

"That sounds fine," Eric replied.

Chris added, "What I meant to say was, you must have heard that Michael Ovitz led CAA's team to help Panasonic acquire Universal, earning a $70 million commission in the process. Morgan Stanley's team won't come cheap either."

Eric chuckled, "Everyone knows the Japanese are willing to get ripped off. We certainly are not. How much would it cost to hire Morgan Stanley's team?"

"If we go by a team of 100, I estimate it will be around $50 million. Once we initiate a hostile takeover, completing the acquisition will take at least six months, and it may stretch to a year or more," Chris said, looking at Eric in anticipation.

Disney's market value was just over $3 billion at that time, but the final amount involved in the acquisition wouldn't be less than $5 billion. With Morgan Stanley taking a 1% commission from that, the fee was quite reasonable. Eric vaguely recalled that major investment banks usually charged shareholders 10% or more for assisting in stock sales.

Reflecting on those figures, Eric quickly made his decision, stating, "Let's go ahead and hire Morgan Stanley's team. And let them know, if they can complete the acquisition within six months, I will increase their original commission by an additional 30%."

For corporate mergers, the longer the process dragged on, the greater the uncertainties and costs involved. Many hostile takeover attempts fizzled out due to prolonged delays. Thus, far from dissuading Eric, Chris showed his admiration for Eric's decisiveness: "I'll relay that condition to Morgan Stanley."

...

Over the following week, while Chris secretly made the necessary final arrangements, Eric remained actively involved.

With Toy Story crossing the $100 million mark in its third week and The Terminator 2 continuously climbing at the box office, industry experts estimated both films would earn about $200 million each in North America. Having two films grossing over $200 million during a summer release was impressive enough to make Hollywood's other film companies green with envy.

Consequently, Firefly Films hosted a grand celebration party at Eric's Liberty City Manor. This was the third large-scale event held at the manor, and in stark contrast to previous parties, Eric not only invited numerous Hollywood stars and executives but also approved dozens of media reporters to cover the event.

All of this was aimed at building momentum for the upcoming acquisition. The greater Firefly's influence, the more favorable the acquisition would be.

In just one week, not only were Toy Story and Terminator 2's box office successes widely celebrated, but Cutthroat Island and Fox's Hot Shots! sequel also faced criticism anew. Eric had initially planned to follow Sony and Panasonic's lead in a complete acquisition, rather than attempt to swap out Firefly shares for Disney stock.

Thus, this entire publicity stunt was not about instilling confidence in Disney investors to sell their stock. Throughout various newspaper articles, Eric subtly conveyed one key message: if they didn't sell, Disney could continue to release films like Cutthroat Island or Hot Shots! sequel, further targeted by Firefly's blockbusters.

While many sensed this underlying tension, it wasn't until Firefly submitted its acquisition offer to Disney that people truly grasped the implications of Eric's earlier statements.

...

On Monday, July 22, 1991, after working the weekend without rest due to the catastrophic box office failure of Cutthroat Island, Michael Eisner had spent the past few weeks attempting to pacify Disney's shareholders and creditors.

Eric's remarks about the so-called Cutthroat Island trilogy only fueled Eisner's frustrations; a single statement worsened his already precarious situation. Many shareholders chastised him for stubbornly relinquishing a good working relationship with Eric. Eisner wanted to work with Eric, but after last year's upheaval, it seemed nearly impossible.

After breakfast at his Malibu villa, Eisner didn't head to Disney headquarters. He had already booked a flight to meet with Disney's largest shareholder, the Bass family in Texas.

As Disney evolved over the years, the Disney family that had founded the brand no longer held a significant stake; currently, the Disney family foundation owned about 3% of Disney stock. In contrast, the Bass family, having made their fortune in oil, had acquired 16% of Disney's shares during the 1970s and 80s, becoming its largest shareholder.

In 1984, it was the Bass family and Disney elder Roy Disney's support that enabled Michael Eisner to secure the position of CEO.

As the driver took him to Los Angeles airport, a small private jet was waiting -- a benefit of Eisner's role as Disney's Chairman and CEO.

Once the plane took off, Eisner relayed a few instructions to his assistant before deciding to rest for a while. The flight from Los Angeles to Austin, Texas, would take over two hours, and the burdens from the Cutthroat Island box office disaster had left him mentally and physically exhausted.

Not long after dozing off, the cabin lounge door was knocked on, with an urgent voice calling, "Mr. Eisner, Mr. Eisner! Mr. Wells has an emergency call coming through."

Awakened abruptly, Eisner frowned as he exited the lounge. The assistant, noticing Eisner's gloomy expression, handed him the cordless phone, softly explaining, "I mentioned you were resting, but Mr. Wells insisted it was urgent."

Eisner nodded expressionlessly, took the phone, closed the lounge door behind him, and poured himself a glass of red wine, asking, "Frank, what's going on?"

On the other end, Disney president Frank Wells spoke hurriedly for over a minute before Eisner realized that his wineglass was spilling over. Yet, he was too preoccupied to care, casually placing the empty wine bottle on the table before hanging up and exiting the lounge. He called out to his assistant, "Nick, notify the pilot that after we land, we're returning straight back to Los Angeles."

By noon, Eisner finally arrived back at Disney headquarters, where the board members were already waiting in the conference room.

Seated at the head of the table, Eisner silently reviewed the acquisition proposal submitted by Firefly. After a whispered curse, he turned to Frank Wells and inquired, "Frank, are you sure this isn't a joke? Where does Firefly think it can gather enough money to acquire Disney?"

Frank patiently explained, "I personally called Eric Williams to verify this."

"I'm asking where they got the money!" Eisner's voice had grown into a roar.

Wells, maintaining his composure, shook his head. Just as Eisner was about to lose his temper, one of the board members cautiously ventured, "Could it be from the previous oil crisis?"

Eisner paused, quickly connecting the dots from Eric's actions last July and August. He felt certain that Eric had raised around $700 million in capital back then.

Almost a year had passed since that event, with Eric having kept a low profile ever since. Everyone presumed he hadn't made much money, but looking at the acquisition offer, Eisner realized everyone had been duped.

Faced with embarrassment, he clenched his fist and looked up, stating, "Now, let's discuss what to do next. If Eric Williams successfully acquires us, we all might need to pack our bags. So we absolutely cannot allow that to happen."

The meeting room erupted into a flurry of voices. The sixteen Disney board members either favored Eisner or were former high-ranking executives at Disney. Due to Eisner's tight grip on power, their authority had been significantly diminished. However, they didn't seem to mind, knowing that if a significant decision went awry, it would be Eisner who bore the brunt of the blame, just like with Cutthroat Island. Thus, this cushy job that required no accountability yet offered a high salary was something no one wanted to lose.

"The most important task now is to reassure the shareholders. As long as they stand with us, Firefly's acquisition attempt isn't feasible."

"Hey, it's too bad that Cutthroat Island just caused such a massive loss. Firefly seized the opportunity perfectly."

"Don't forget the creditors. We just discussed deferring payments on maturing bonds last week. That option can't come back because it will only increase the pressure from the creditors, seeing as Firefly's performance is so stellar."

"Firefly now holds 11% of the shares; that's quite a headache."

Discussion buzzed for about five minutes, but Michael Eisner failed to hear anything useful from the people around the table. This infuriated him, as he ignored his role in creating this situation. To solidify his power, the more incompetent board members he had, the better for him.

Disregarding their chatter, Eisner directed his assistant, "Gather all management for a meeting, and send a letter to Firefly's management to formally decline the acquisition."

"Mr. Eisner, according to procedure, we need to disclose this to the shareholders," the assistant gently reminded him.

Eisner shot an irritated glance at his assistant, "Just do your job."

The assistant, feeling sheepish, nodded and exited.

Eisner rapped his fingers on the table to silence everyone, declaring, "Alright, quiet down. We'll discuss this once management arrives."

A hushed silence fell over the board members.

...

On the same day Firefly submitted its acquisition offer to Disney's board, Disney rejected the proposal outright and selectively shared information about Firefly's offer with numerous shareholders.

Within just three days, while rejecting Firefly's terms, Disney swiftly approved a protective plan against hostile takeovers known as the golden parachute.

The golden parachute referred to a pre-signed agreement designed to protect the management from hostile acquisitions, stipulating that if a target company were acquired successfully, the existing high-level management would receive substantial severance packages should they face termination. Clearly, when confronted with a hostile takeover, Michael Eisner's first thought was still about safeguarding his own interests.

Three days later, Firefly held a press conference to publicly announce its acquisition plan for Disney and, as a Disney shareholder, demanded that Disney's management immediately disclose its financial status to the investing public.

*****

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