[Chapter 599: Tough Questions]
Eric only stayed in Los Angeles for one night and hurried back to New York the next day.
Even though he had fought tooth and nail for Firefly's debt underwriting business, Morgan Stanley and Deutsche Bank remained very professional after reaching a cooperation intention. They conducted tight reviews of Firefly's business and financial information while researching investors' investment intentions. After multiple discussions, both sides finally reached an agreement on detailed cooperation terms and bond pricing after about half a month. Subsequently, Morgan Stanley and Deutsche Bank submitted the registration statement to the securities regulatory bodies in the U.S. and Germany.
The securities market was well-established. Government securities departments mostly played a regulatory role, often ensuring the accuracy of information disclosed by bond-issuing companies without evaluating the investment prospects of the bonds. Even bonds with significant risks or no investment value could easily pass review as long as detailed and accurate report documents were submitted.
Thus, the bond underwriters usually played the leading role in the bond issuance process. Firefly and its two lead underwriters eventually established a bond annual interest rate of 5.5%. Given Firefly's asset credit rating, this rate was considered very high. If the financing scale hadn't significantly increased risk, Firefly's long-term bond rate would have only needed to be around 4%. During the preliminary market tests conducted by Morgan Stanley and Deutsche Bank, investment funds from various states in the U.S. and European investors had already expressed intentions to purchase Firefly bonds totaling nearly $3 billion. Once the registration documents were sent to the U.S. and German securities trading departments for review, it essentially assured Firefly's success in this securities issuance.
After subsequent approval from the securities departments, Firefly just needed to cooperate with Morgan Stanley and Deutsche Bank in selling the bonds and transfer the funds to the original ABC shareholders.
Eric handed over the follow-up on the securities issuance to Firefly's CFO Carolyn Elliott. He then began to participate in the specific merger process between Firefly and ABC. The two companies had already detailed the specific merger plan during preliminary negotiations; Firefly had to conduct another detailed review of ABC's balance sheet and asset list.
Firefly's $15 billion acquisition of ABC easily surpassed last year's Viacom purchase of Paramount, becoming the largest acquisition in North American media history. Such a large sum of money undoubtedly resulted in a very substantial asset portfolio.
In addition to ABC's most valuable asset, which was its nationwide public television network and over 200 affiliated local stations, ABC's assets also included ten owned and operated television stations and twenty-one radio stations located in major U.S. cities, the ABC television production department in Los Angeles, an 80% stake in the ESPN sports channel, the jointly owned A&E network with Hearst Corp, as well as a range of newspapers and magazines previously under Metromedia. Moreover, these assets included a significant amount of property, vehicles, and similar assets.
Additionally, there were many other more scattered assets. Eric even discovered a hand-drawn animation production company based in France on ABC's asset list.
Firefly's acquisition team spent nearly a month clarifying these asset details after ABC's board approved the acquisition. It wasn't until the morning of April 10 that Eric and ABC's Tom Murphy signed the final transaction agreement, marking Firefly's successful acquisition of North America's largest television network.
After signing the merger agreement, Firefly's total shares expanded significantly, reaching 135 million shares. Of these, ABC's original shareholders, minus those who directly exchanged a portion for cash or bond-holding shares, would total 32.5 million shares of Firefly stock. Jeffrey and Michael Lynn each received stock allocations of 1.5 million shares and 500,000 shares from Eric, respectively. Firefly's recent equity incentive plan totaled 1 million shares. The remaining shares were all held by Eric, totaling 99.5 million shares, representing a 73.7% stake in total equity.
Following the merger, Firefly Pictures was renamed Firefly Group. The company evolved from a film company into a comprehensive media group involved in films, television, music, books, and tourism.
...
With greater transparency during the merger with ABC, Firefly's financial and stockholding information once again became the focus of public attention.
At this time, most well-performing companies in the North American stock market had P/E ratios ranging from 10 to 30. The P/E ratio represented a company's earnings and investment risk information and was a crucial financial metric for publicly listed companies. The P/E ratio was typically calculated by dividing a company's stock price by its earnings per share.
Using the 20 P/E ratio of Time Warner, which was of a similar rank to Firefly, and calculating based on Firefly and ABC's combined earnings in 1993, Firefly's stock price was predicted to reach about $252 for its 135 million shares. This implied Firefly's market value was estimated at around $34 billion, meaning Firefly had securely surpassed Time Warner to become North America's largest media group.
Before the acquisition of ABC, Firefly had already outperformed Time Warner in profits, but doubts about its position still lingered due to the uncertainties in film investments. However, by this point, no one doubted Firefly's leading status in the U.S. and global media landscape.
As a result, this became a focal point for many media outlets. At the press conference following the signing of the final agreement, the first question posed by a BusinessWeek reporter was, "Mr. Williams, with Firefly now the largest media group in North America and globally, and considering your youth, I assume you won't stop moving forward. What will Firefly do next?"
Of course, Eric nurtured further ambitions to control all of Hollywood through various direct or indirect means, but he certainly wouldn't voice such thoughts openly. Although successfully completing the acquisition of ABC, the sheer scale brought numerous upcoming challenges, and the first thing Eric needed to do was resolve a series of potential issues.
After pondering for a moment, Eric replied, "My current plan is to manage the new Firefly Group well. Beyond that, I don't have any other plans."
The BusinessWeek reporter persisted, "Firefly and ABC are already top companies in the country. Doesn't Mr. Williams harbor any ambitions for continued expansion?"
Eric realized that this reporter might have ulterior motives. However, maintaining his smile, he responded, "I'm not sure if anyone else has noticed, but during my research, I found that companies, regardless of size, often face a series of issues when they get a new owner. Even if the company was performing well prior, it can encounter losses. Some companies previously thriving can enter a long period of stagnation due to a merger, while others can become even more prosperous. This process is very akin to a change of power in a country, akin to a phoenix rising from the ashes; either it emerges anew or turns to ashes. I personally hope Firefly can smoothly traverse this 'rebirth' period in two to three years."
After Eric finished speaking, murmurs stirred within the audience. The BusinessWeek reporter, after briefly contemplating, immediately added, "Mr. Williams, your perspective is quite novel. I've never heard this before. Could you provide a few examples to support it?"
"Very simple. Let's take ABC as an example. In 1985, before ABC was acquired by Metromedia, it had annual profits of $130 million, but the year after the merger, the Metromedia-ABC company fell into a $70 million loss. Mr. Tom Murphy and Mr. Buffet are both exceptional business and investment talents. ABC's recent stellar profits are the best proof of this. Therefore, it shouldn't be their issue, but rather an illustration of the point I just made. Of course, my personal knowledge is limited, and I can't guarantee that this viewpoint is a universal phenomenon. So if any economics experts are interested, they can study it," Eric concluded, and without allowing the BusinessWeek reporter to continue, pointed to another reporter, saying, "Alright, next."
"Mr. Williams, based on recent media reports, your personal assets are nearing $20 billion. Yet, it seems you have not engaged in any charitable activities or established any charitable funds. Don't you think this reflects a serious lack of social responsibility?"
Eric was momentarily taken aback; this was indeed a sharper question. He noticed the press pass of the female reporter from The Christian Science Monitor and realized why she might ask such questions.
Aside from Eric, another individual not particularly enthusiastic about charity, Warren Buffet, was seated nearby. While Eric was unaware of the details of Buffet's foundation, he understood that at that point, Buffet's foundation had rarely allocated funds for charitable activities. Most of its funding adhered to Buffet's investment preferences, stemming mainly from dividends of Berkshire Hathaway stock, with Buffet personally contributing not even a dime.
After the female reporter's question, she pointedly cast a glance at Buffet, making her insinuation clear. At that moment, Eric and Buffet were respectively ranked first and second on Forbes' list of North America's richest individuals.
Facing such a sensitive question, Eric had to give it thoughtful consideration before responding, "I believe real responsibility is about using one's wealth to create more employment opportunities for society, allowing ordinary people to be self-reliant, rather than expecting to gain without effort. Firefly has always strived to do this, employing thousands through projects like the Firefly Studios built in Los Angeles and the digital studios invested in Florida. Of course, general charity work plays a substantial positive role in society, as there are many who find themselves in dire situations requiring help. In the past, I have been too busy with my personal career to pay much attention to this aspect; I therefore plan to establish a corresponding charitable foundation in the coming years and increase our contributions to charitable activities."
Eric's answer seemed rather smooth, but the female reporter appeared dissatisfied. Meanwhile, the moderator quickly recognized his earlier mistake and called on another reporter, steering the ensuing questions toward standard concerns about Firefly's next steps, such as restructuring, layoffs, or business adjustments.
...
After the press conference concluded, the group quickly transitioned to the customary celebration party.
Eric, holding a glass of champagne, was just about to chat with Robert Iger, the former president of ABC, when Tom Murphy and Buffet approached him side by side, both old men sporting expressions that suggested they were ready to confront.
After the merger, ABC disbanded its board seat positions, and according to the agreement, Tom Murphy would remain CEO of ABC until the end of 1995. Both Tom Murphy and Buffet initially thought this was Eric's way of appeasing them, but only after hearing Eric's remarks during the press conference did they realize how overly confident they had become. This young guy clearly aimed to drain the last bit of value they had: "Hey, Eric, I finally understand! You insisted on having this nearly seventy-year-old man continue as ABC's CEO just to help ABC smoothly navigate this merger."
Eric observed Tom Murphy's demeanor -- while fierce, it still bore a trace of a smile. He shrugged slightly and replied, "But Tom, I never denied that was my intention. You are now both major shareholders of Firefly, so you shouldn't oppose making ABC better, right?"
Upon hearing Eric's words, Tom Murphy felt that being genuinely annoyed was a bit unwarranted, but he certainly wouldn't admit it. Laughing, he reproached Eric, "No wonder Warren just said you're a bit too smooth."
"Oh, I take that as a compliment," Eric replied, smiling at Buffet.
Buffet shook his head, chuckling, "I completely agree with your remarks to that female reporter; creating more jobs for society is true charity. Anything else simply enables people to idly enjoy benefits without working for them. I've encountered many such situations where individuals wasted donor money."
*****
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