Miramax Bids Due Thursday, Battle Rages Over Valuation

The books show $556 million in revenue in 2008. But what was it in 2009?

The Miramax sale is being bogged down as bidders struggle to get their arms around the revenue figures being made available by the Walt Disney Company.

Firm bids –  with numbers attached to language like "we are prepared to pay" — are due Thursday at 5 pm, and from there Disney will choose a short list, expected to be three or four finalists.

 But the process hasn't been easy, and the question all along has been: What’s the indie division worth?

Thus far Disney has revealed to prospective bidders that Miramax had revenues of $556 million in 2008, according to an individual close to the bidding.

But what’s the breakdown? That includes $133 million in domestic video, another $99 million in television sales.

The revenue figures for 2009 are not available, but most of the bidders believe that it’s down significantly from that figure. (I suspect that it’s something like that $350 million figure that Disney has been quietly floating as the division’s revenue.)

But most of the bidders — and the most likely among them remain The Weinstein Company, Summit, Studio Canal and Lionsgate — see Miramax’s value in the library. It’s still unclear how much of that total sum comes from the library alone. Disney is not so eager to break that out.

“They’re making it difficult to sift through and figure that out,” said one bidder.

Furthermore, what the bidders need to figure out is how much revenue the library will continue to produce considering the studio has gone dormant.

Another issue has become a stumbling block: Miramax has five movies on the shelf, including an animated musical called "Nomeo and Juliet," and a Jennifer Aniston comedy, "The Baster," that no one has seen, and that Disney wants to unload on the buyer.

That's a big pill for any buyer to swallow, without having seen the movies (which are presumably not that great, or else Disney would already have taken and released them.)

No matter how it is sliced, the number has to correlate to the $700 million price Disney is seeking, which would normally be an 8 to 10-times multiple of Miramax’s profit.

Using round math, that would mean about $70 million of cash flow out of Miramax on a go-forward basis. No one I’ve spoken to feels confident that the company really produces that much. (The best estimates I'm hearing are between $50 million to $65 million a year.)

Hence – there’s hedging going on.

The bidding was supposed to be narrowed down to three or four serious suitors by now. But it hasn’t happened. The 17 suitors written about so far are a mish-mash of companies and hedge funds that have signed the non-disclosure agreement, but no one expects that many bids. 

The suitors are being understandably cautious. And everyone knows – Disney doesn’t do bargains.