After hesitating for a moment, Lew Wasserman said, "Simon, waiving the breakup fee entirely is impossible. The board won't agree. But we can discuss the exact amount."
Simon had no intention of wasting too much time on this. "Then fifty million dollars. A fixed number."
Fifty million was a fortune beyond reach for most ordinary people, but to Simon now, it was not much.
The breakup fee Matsushita and MCA had discussed was 2.5% of the final deal value. If calculated on MCA's current market value, close to six billion, then if Matsushita abandoned the acquisition, it would have to pay a breakup fee of one hundred and fifty million, roughly equivalent to half a year of MCA's net profit.
Wasserman's original thinking was that Daenerys Entertainment's breakup fee could be set between 1% and 2%. That was already a major concession. Hearing Simon offer only a fixed fifty million, he shook his head. "Simon, that number is too low."
Simon held his ground. "You want me to enter this quickly, Lew. That's the price you have to pay."
Wasserman thought again. "Then this has to be made public earlier."
Simon shook his head. "No. After we sign the letter of intent, Daenerys will launch a feasibility review for acquiring MCA. We won't actually initiate a purchase immediately."
Wasserman's mouth twitched. A feasibility review? Who would believe Daenerys Entertainment had not completed even that basic groundwork yet?
But both of them understood it was just an excuse, so Wasserman did not argue.
After more bargaining, Simon reluctantly raised the breakup fee to sixty million, roughly 1% of MCA's current market value. Within a week, Daenerys Entertainment would sign a letter of intent with MCA, evaluate the feasibility of acquiring MCA, and MCA would cooperate by providing the necessary internal asset and financial data.
At the same time, while this still had to be kept confidential from the outside, MCA could inform Matsushita that Daenerys Entertainment had formally entered the bidding.
Wasserman personally saw Simon out. When he returned to the office they had just used, MCA president Sid Sheinberg was already there. Seeing Wasserman nod, Sheinberg knew Simon had confirmed his entry. He asked, "Lew, did you discuss management control with Westeros?"
Three years earlier, after a serious illness, Lew Wasserman had finally shown signs of wanting to retire. That was also why he had agreed to sell the company he had controlled for decades.
But power was the kind of thing that the deeper you sank into it, the harder it became to let go.
Over the past few years, as his health improved again, Wasserman's desire to retire gradually faded. In the terms Matsushita had been discussing with MCA, keeping the existing management in control was a very important item.
Compared to seventy-seven-year-old Wasserman, Sid Sheinberg, at fifty-five and in his prime, was even less willing to surrender power.
Wasserman shook his head and sat down behind his desk at an unhurried pace. "A friend of mine in Washington called me yesterday morning. He said Ovitz and his people are pulling strings, trying to block Daenerys Entertainment from acquiring MCA. I asked Ovitz myself this morning. He admitted it."
Ronald Reagan had once been an MCA contracted performer in his early years, so Wasserman actually had decent political connections.
Sid Sheinberg was surprised by the news and forgot his question for a moment. He said instinctively, "We can't let Ovitz sabotage this acquisition."
"Of course," Wasserman said, gesturing for Sheinberg to sit across from him. "I've already warned him. But if I have to choose between Matsushita and Daenerys, I still prefer selling MCA to Matsushita. Do you understand why?"
Sheinberg pulled over a chair and sat down opposite him. After thinking for a moment, he nodded. "If Daenerys buys the company, Westeros probably won't let us keep running MCA."
"Not probably. He definitely won't," Wasserman said. "Once Westeros gets MCA, he will merge Daenerys and MCA together. A lot of our businesses happen to complement Daenerys. Westeros has built a very strong management team over the past few years. When the time comes, there's no way he keeps us."
Sid Sheinberg quickly followed the logic.
Wasserman pushing Daenerys Entertainment into the bidding could force Matsushita to raise its price.
Then, at the right moment, Ovitz would move and squeeze Daenerys out. That way MCA could be sold smoothly to Matsushita. The shareholder would change, but MCA would still remain in the hands of this management group.
Seeing understanding dawn on Sheinberg's face, Wasserman added, a little wistfully, "And besides, Hollywood has always belonged to us. Westeros, no matter what, is still an outsider. I don't believe the other studios will just stop trying to block Daenerys Entertainment's expansion because of the profits from one or two films."
This "us" naturally referred to Jews.
Hollywood's Seven, or now arguably the rising "eighth," Daenerys Entertainment, regardless of who sat behind them as shareholders, the true power holders running the studios were largely Jewish. Lew Wasserman, Sid Sheinberg, Steve Ross, Barry Diller, Sherry Lansing, Peter Guber, and others were all the same.
Even Amy Pascal was no exception.
So when people said Hollywood was Jewish Hollywood, there were not many who would disagree.
The Jewish community that held Hollywood would instinctively resist a non-Jew accumulating more and more power.
Simon Westeros was, unfortunately, someone with an unclear background and an unknown origin. Before "Westeros," he had a surname that could have indicated ethnicity, but no one knew whether it was real. Which meant no one truly knew what blood he carried.
In Western countries with traditional, conservative bones, different groups had always cared deeply about questions like this.
The unverified rumor that some American president was bound by blood to have at least some connection to the British royal family was the best proof of that mindset.
Simon Westeros's rise was so fast it left people dizzy. But this MCA acquisition was not something anyone could be slow enough to miss.
In operating Daenerys Entertainment, Westeros had shown no tendency toward pushing Jews out or anything like that. But he was not Jewish, or at least he had never publicly declared or acknowledged that he was Jewish.
On this matter, Hollywood's Jews might not understand different cultures, but they understood a shared truth all too well.
"Not of our people, their hearts must be different."
Sid Sheinberg saw nothing wrong with Wasserman's words and pressed, "Lew, what exactly is Ovitz planning to do?"
...
Simon knew nothing of Wasserman's intentions. After returning to Daenerys Studios, he instructed Amy and the others to formally begin contact with MCA.
They needed to sign the letter of intent as soon as possible. Not only would that lock in the sixty-million-dollar breakup fee, it would also allow them to formally request internal asset and financial data they could not obtain before, so the acquisition team could adjust the previously drafted plan.
After his meeting with Amy and the others, Simon returned to his office, and his assistant came in carrying a folder.
"This is material from New York, about David Merlos's bill to restrict overseas companies from acquiring American assets. They'll submit it to Congress next week. Also, we've already helped contact The New York Times, The Los Angeles Times, and The Washington Post. They'll follow up with synchronized coverage."
Simon took the folder from her and sat behind his desk, lowering his head to read.
David Merlos was the U.S. congressman Simon had met at the Hearst party last time.
Even though he had ended on bad terms with the Hearsts, and even though he did not believe Merlos's bill could gain congressional support, Simon still told James Rebould to contact him afterward and had Westeros-backed Schlap Consulting track the matter closely, actively helping Merlos build momentum.
As long as it put some pressure on Matsushita's attempt to acquire MCA, it was worth doing.
And after one round of cooperation, Daenerys Entertainment could also establish a connection with the congressman, David Merlos. Networks were always built one exchange at a time.
Because Daenerys Entertainment had already prepared thoroughly for the MCA acquisition, in just the two days of the weekend, it quietly signed the letter of intent with MCA.
This time, MCA did not quietly leak it to the media. Still, influenced by Daenerys Entertainment's formal entry, Matsushita withdrew a pricing proposal from last week and began renegotiating with MCA.
Because of this shift, the MCA deal was bound to drag on until at least the end of October before any result emerged, which was exactly what Simon wanted.
With that settled, Simon flew to Melbourne on Monday, October 15, as planned.
For several days he stayed with Jan de Bont and the others at the filming base in western Melbourne, a place that had been an abandoned factory and now already looked like a studio taking shape. While he was very satisfied with most of the footage de Bont had shot, because he was not personally at the helm, Simon still found many shots that needed to be reshot, some for technical reasons, some simply because he was not happy with the effect.
However, the reshoots did not begin immediately. They were scheduled three months later, in January of next year.
By then, the rough cut and most of the visual effects shots for Batman: The Dark Knight would be complete, allowing them to confirm reshoot details far more precisely and save budget.
Because the first film had been a huge success, Batman: The Dark Knight's budget had no real ceiling if needed, but Simon had always been very strict about it. With tight, meticulous preproduction planning, even counting roughly two weeks of reshoots, the final budget could still be kept within the planned eighty million.
While Simon was in Melbourne, Matsushita, after an urgent reassessment, submitted a new offer to MCA, raising the overall acquisition price to $6.5 billion, already close to the deal price Simon remembered.
Perhaps because news of Daenerys Entertainment's formal entry inevitably leaked, MCA's stock also rose noticeably again this week.
If the trend continued, it was only a matter of time before MCA's market value exceeded Simon's planned ceiling of $7 billion.
The one small consolation was that, compared to Columbia Pictures' massive debt of over a billion, MCA, which had always been in strong operating shape, had a debt ratio that was almost negligible. It was not debt-free, of course, but it was mostly short-term payables and operational notes, not large bank loans.
...
The Johnston family estate outside Melbourne.
It was already Saturday, October 20. They would return to Los Angeles tomorrow. Simon came over specifically to have dinner with everyone. Because of certain matters in North America, Janet had not come to Australia with him this time.
It was still a big table. Anthony Johnston's family, Norman Johnston's family, and, under the old man's urging, Patrick Johnston, the youngest son, who had recently become officially engaged to Sarah Keaston. Veronica came as well.
After dinner, Simon went to the study with the old man, the eldest, and the second son. Patrick felt that since he was a Johnston man, he should have the right to sit in too. But before he could finish his joke, the old man shot him a glare, and he immediately turned into a quail.
"If you launch acquisitions of two companies at the same time, maybe you can avoid certain market frenzy. But Simon, have you considered the funding pressure afterward? I mean not only the repayment pressure later, but the money required for both companies' further development, especially Bell Atlantic. Telecom expansion has always required enormous investment. Even if it's only a regional telecom company, if you want to develop emerging internet access services, just the infrastructure alone will probably have to be measured in billions?"
In the study, Raymond Johnston clearly knew Simon's recent moves in detail. The moment he opened his mouth, he sounded distinctly pessimistic.
Simon had, of course, considered it.
With the Westeros system's current foundation, supported by Daenerys Entertainment's profits over the next few years, the planned sale of certain tech stock holdings, and the cash flow of the two target companies themselves after acquisition, it would not be a problem to sustain three to five years of debt repayment.
Further out, after next year's Gulf War, the U.S. economy would recover again. Various other assets held by the Westeros system would rapidly appreciate over the following years.
In Simon's memory, by 1995, both Microsoft and Intel would reach market caps around fifty billion.
With Westeros holding 20% of Microsoft and 15% of Intel, just the value of those shares could reach an estimated $17.5 billion. If necessary, Simon could ease funding pressure simply by cashing out part of those holdings.
After Simon laid out his plan in broad strokes, the old man's brows knit even tighter. "Putting your hopes on the U.S. economy turning around is unbelievably stupid. Bush is not a president who cares about domestic economics. He's still planning to drag America into another war. Go look at what the American economy was like during Vietnam. If he manages to win re-election, the economic situation will only keep getting worse. It won't turn around at all."