[Chapter 643: The Time Difference]
"Hello everyone, this is Instant Entertainment News. Since the end of June, following the tremendous success of the 2D animated film The Lion King, a significant disagreement surfaced between the thriving Disney Animation division and its parent company, Firefly Group, regarding the development strategies for animated films. Subsequently, tensions began to escalate.
This past Monday, notable Wall Street investor Ron Perelman led the Firefly Creditors Alliance, which suddenly pressured the Firefly board, demanding two creditor board seats. The request from the Firefly Creditors Alliance was quickly supported publicly by Disney's animation division, with head Peter Schneider stating that bringing in creditor board members would allow for better oversight of Firefly Group's management and operations, preventing major shareholders from acting arbitrarily and protecting the common interests of minority shareholders, creditors, and the tens of thousands of Firefly employees."
At a luxurious Beverly Hills mansion, a small cocktail party was taking place. Guests, including Ron Perelman, Roy Disney, and Peter Schneider, were shaking their champagne flutes enthusiastically as they watched a television set placed in the open air, seemingly waiting for something.
On the screen, the host summarized the news and continued, "After The Lion King broke the box office record for animated films in the U.S. last week, a Firefly spokesperson publicly announced that a grand celebration party for The Lion King would be held today at the Hollywood Sunset Tower Hotel. The industry widely speculated that this party might signify Firefly Group's beginning to compromise with Disney's animation division.
However, this afternoon, employees of Disney's animation division issued a statement in the Los Angeles Times, declaring that in solidarity with the Firefly Creditors Alliance's request to join the Firefly board, all Disney animation employees would boycott the party. It is currently 7:15 PM Pacific Time. For the latest updates, let's go to our reporter on the ground in Hollywood's Sunset Boulevard..."
The feed switched to Los Angeles at dusk, where a reporter stood in front of the Sunset Tower Hotel with a microphone. "Good evening, viewers. As we can see, the Sunset Tower Hotel, which should be bustling with activity, appears just as it usually does. Fifteen minutes ago, a spokesperson for Firefly announced the emergency cancellation of tonight's celebration party for The Lion King. However, prior to 7 PM, vehicles carrying Firefly executives like Eric Williams and Jeffrey Katzenberg still appeared at the hotel parking lot. We speculate this indicates the executives were making a final appeal, but it seems those efforts have clearly failed. As of now, we have not seen any senior management or employees from Disney's animation division at the Sunset Tower."
Watching the desolate hotel on the screen, Peter Schneider suddenly became worried that he might have gone too far. He was not concerned about offending Eric; he felt he could find another job even after leaving Firefly. Yet, the current situation didn't seem to benefit his interests much.
Noticing the change in Peter's expression, Roy Disney patted him on the shoulder and said, "Peter, think about how Eric Williams has treated us over the last couple of years. Besides, once Ron and the others secure their two board seats, as long as Disney Animation continues to be profitable, we won't have to worry about anything."
Still wearing a cheerful smile, similar to that of the laughing Buddha, Ron Perelman added, "Don't worry, Peter. Once we secure those two board seats, there will be five directors on the board who are not under Eric Williams' influence. We can then take advantage of this opportunity to build our own strength within Firefly. By then, even if Eric possesses outright controlling interest in Firefly, he won't dare make any reckless moves that could risk instability."
Peter Schneider relaxed and nodded. Roy Disney then raised his champagne flute, saying, "So, in the spirit of our shared goal, I suggest we all raise a glass."
Most of the attendees at the cocktail party were representatives of Firefly's creditors. Just as they were about to agree with Roy Disney, the television screen that had been playing the news suddenly changed.
...
The image showed various media reporters who had been initially scattered around the Sunset Tower Hotel, now swarm toward the hotel's front entrance as if pulled by a magnetic force. Among the reporters, Eric's figure quickly appeared in a somewhat shaky live shot from a television station.
In the footage, Eric stood expressionless, protected by bodyguards. Once the reporters quieted down, Eric stared intently into the camera, seemingly gazing at certain people watching from their television sets. In a serious tone, he said, "In that case, tomorrow morning at 9 AM, Firefly will hold a press conference, and I invite both the favored and the unfavored to attend."
After tossing out this statement, Eric hurriedly entered his vehicle under the protection of his bodyguards.
In front of the TV, the group that was about to toast for a celebration looked at each other in confusion. Even the shrewd Roy Disney felt a twinge of ominous premonition. As a member of the Disney family, which was crucial to Disney, Roy had interacted with Eric numerous times. He recalled Eric had always exhibited a calmness well beyond his years. But even the most composed individual could be impulsive, and if Eric were to decide to burn his bridges, it could spell disaster.
...
Due to this anxiety, Roy Disney struggled to get a good night's rest. The next morning, he woke up early to turn on the television, patiently waiting until nine o'clock when the news channel featured the scene from the Firefly Group's press conference hall.
"Currently, Firefly Group holds 17% of Marvel Entertainment's debt. As a significant creditor of Marvel, we have discovered that Marvel's operational losses for the first half of 1994 have already exceeded $24 million, and Marvel's stock price has continued to decline. With a total debt of $553 million, Marvel's stock valuation is insufficient to cover even $300 million, leading to severe insolvency.
According to federal company law, we will file a lawsuit in the New York District Court while making this statement, requesting immediate involuntary bankruptcy protection for Marvel. At the same time, it has come to our attention that significant sums of debt financing intended for company development have been misappropriated by Marvel's parent company, MacAndrews & Forbes Holdings Company. This serious violation of bond trading law directly caused Marvel to be on the brink of bankruptcy. Therefore, Firefly will file a lawsuit to ensure MacAndrews & Forbes Holdings is held accountable for its illegal actions."
Roy Disney listened patiently to the statement read by Katzenberg on TV. After worrying throughout the night, he felt a wave of relief wash over him. The statement made no mention of Disney's animation division, indicating that Firefly executives were not inclined toward a scorched earth approach.
However, Roy Disney immediately questioned the intent behind this speech. He could tell that this was likely Firefly's retaliation against Ron Perelman's actions, but many details were unclear to him. He picked up the phone and dialed his personal lawyer.
After his lawyer explained the situation, Roy began to understand the implications.
According to U.S. corporate law, when a company faces severe insolvency and continued operational losses, creditors have the right to request involuntary bankruptcy protection. Bankruptcy protection differs from bankruptcy liquidation; it essentially gives creditors a buffer period to allow the debtor to propose a reorganization plan and repayment scheme. However, if such a plan fails, the company will face imminent liquidation.
Firefly Group's request for Marvel's bankruptcy protection was driven, much like Ron Perelman's interests, to gain control of Marvel from a creditor's position. However, unlike Ron, Firefly's position was bolstered by Marvel's financial distress, thereby gaining potential support from federal courts.
Once Firefly seized control of Marvel, the illegal misappropriation of Marvel's financing by MacAndrews & Forbes Holdings would become a significant weapon against Ron Perelman. MacAndrews & Forbes Holdings would not only face return requests for Marvel's financing but also could incur massive fines from the SEC. This was the ultimate trump card.
In a country with stringent financing regulations, the ramifications of illegally appropriating hundreds of millions in financing were far from the petty fines in the tens of thousands. If proven guilty, even a company valued in the hundreds of billions could face devastating penalties from the SEC.
...
At this moment, in the same Beverly Hills mansion where the cocktail party had taken place, Ron Perelman, still in his pajamas, no longer exhibited his usual calm demeanor. His hand holding the microphone trembled, reflecting fear and anger. After Firefly Group issued the statement, several entities, including Berkshire Hathaway, State Street Global Advisors, and Firefly Investment Company, all released similar statements as creditors. These companies owned nearly 90% of Marvel Entertainment's bonds. If the New York District Court deemed Firefly's demands valid, Ron Perelman realized he would have no room to maneuver among the other creditors.
"Avy, I want an explanation. Why am I only hearing about this now? A 90% transfer of bond ownership -- shouldn't I have been notified ahead of time? Tell me why!" After an angry outburst directed at Marvel CEO Avi Arad, Ron Perelman listened patiently to the latter's explanation before slamming the phone down onto the table.
Avi Arad explained that Firefly and several other creditor institutions had only recently submitted the related debt transfer declaration to Marvel, and that Marvel had prepared the relevant documents only because Ron Perelman happened to be in Los Angeles at the time.
Ron Perelman quickly sensed two discrepancies in Avi Arad's words -- Firefly and Berkshire Hathaway had utilized a permissible time gap to inform Marvel of the bond transfer within the legal timeframe, after which Marvel's CEO, Avi Arad, had manufactured another delay to further postpone notifying Ron.
Realizing the dire situation was worse than he had imagined, Ron Perelman speculated that Avi Arad might have been co-opted by Firefly Group. If that turned out to be true, he would likely take a significant fall at Marvel.
After pacing anxiously around the bedroom, Ron Perelman suddenly slapped his bald head, realizing that Firefly Group had been strategizing for at least a month. This prompted him to consider two possibilities: either Firefly had forecast his intentions to utilize Disney Animation's division to enter the Firefly board and proactively set up defenses, or, alternatively, Firefly had long coveted Marvel.
After issuing over $500 million in bonds, Marvel no longer held any value in Ron Perelman's eyes; it had simply become a mess he could easily discard. He seldom paid attention to Marvel's operations. If Firefly Group shared this sentiment, their motives could be to push him back, dissuading him from pursuing positions on Firefly's board.
Weighing the possibilities swiftly in his mind, Ron Perelman deduced that the first scenario was highly unlikely. If Firefly's true aim was simply to use Marvel's weaknesses to force him to withdraw, they need not acquire nearly 90% of Marvel's bonds -- this amounted to $500 million in cash.
In Ron Perelman's view, Marvel was not even worth half of that $500 million. Quite frankly, he thought that if anyone offered him $500 million, he would instantly hand over Marvel without hesitation.
If Firefly Group's intention aligned with the second possibility, however, the acquisition of that $500 million suddenly made sense.
The real questions were why Firefly wanted Marvel and why they chose to act at such a sensitive time.
Were they not concerned about potential fallout from Disney Animation?
Or did someone genuinely believe Marvel was worth more than Disney Animation?
Ron Perelman slowed his pacing, and soon he picked up the phone again, bypassing Avi Arad, to dial another Marvel executive's number.
*****
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