Miramax sold to Ronald Tutor, Colony Capital

3:18 PM PST 07/08/2010 by Alex Ben Block, AP

Disney unloads studio, 611-picture library for $650 million

An agreement in principle has been reached for Disney to sell the Miramax Films name and its 611-picture library for about $650 million to a group led by construction executive Ronald Tutor and Colony Capital, a privately held institutional investment firm run by founder and CEO Thomas Barrack Jr. But it is not a done deal.

Tutor and Colony together have committed to investing more than $300 million in equity, with additional capital to be raised from minority partners including James Robinson, chairman of Morgan Creek Prods., and Gulf Capital, an investment firm based in Abu Dhabi.

That still would leave a significant amount, probably $200 million, to be raised in the form of debt.

Tutor brought in Colony only about a week ago, after which the negotiations were led by Colony principal Richard Nanula, a former CFO of Disney. The buyers have entered a period of due diligence, in which they will get a more detailed look at the Miramax books. Closing by a July 28 deadline is contingent on what they find and raising the additional funds.

The deal could still fall apart because it remains unclear where that debt portion will come from. There have been reports that banks have resisted participating because of questions about the valuation, especially without the cooperation of Bob and Harvey Weinstein.

A rival group led by the Weinsteins and bankrolled by Los Angeles investor Ron Burkle came close to a deal before that blew up in May after they decided the assets were not worth their initial bid of $650 million and offered $575 million. At that point, Disney called off the talks.

There are other reasons it will be difficult for Tutor and company to get bank financing.

"A sharp drop in the number of active lenders, the current conservative environment and a significant drop in library values generally could combine to make closing a deal of any significant size challenging," said Clark Hallren, managing partner of Clear Scope Partners, an entertainment advisory that also raises senior debt capital.

But David Davis, managing partner of entertainment advisory Arpeggio Partners, said raising bank debt of the level sought appears doable. "Colony has strong backing behind it and having the former Disney executive is a plus," Davis said. "There are a lot of people involved who can raise $300 million-plus."

The new buyers don't believe they need the Weinsteins to sign off on the deal or to do remakes of the franchise films in the library.

However, sources close to the Weinsteins have insisted that their 2005 exit agreement with Disney gave them consultation and remake rights to more than two dozen of those key films, including "Halloween" and "Children of the Corn," and that no one can remake them without their agreement. The Weinstein Company is currently in production on a sequel to "Scream."

The Weinsteins themselves did not comment Thursday on this latest development but are believed to be very unhappy about this new deal. They are, per a source, still prepared to return and bid again, with Burkle, if the Tutor deal falls apart.

That source said the Weinsteins ascertained that there are about $250 million in receivables in Miramax that can help lower the cost of an acquisition. However, that income is spread over a five-year period, which in current dollars makes it worth about $165 million.

Others have looked at Miramax and walked away because they felt Disney's price of close to $700 million was too high. That list is said to include hedge fund KKR, the Gores brothers, investor George Soros and Netherlands-based Cyrte Investments.

One obstacle to the deal has been the involvement of producer David Bergstein, the CEO of Pangea Media, who is also the subject of a number of legal actions, including an involuntary bankruptcy proceeding. There have been press reports the Hollywood guilds object to his involvement. Bergstein has been an advisor to Tutor on the purchase, but he will not be part of the just-concluded deal and will not have any operational or executive role in the new company which the buyers plan to form after the deal closes.

They will have to invest, or raise, additional millions to produce and distribute movies in order to create a viable business to exploit the Miramax assets. The buyers will apparently hire an experienced movie executive to run the new entity.

Also, despite published reports, the actor Rob Lowe is not involved in the Tutor consortium, though his name was recently linked to Colony.

Tutor, who also heads construction company, Tutor-Perini, is not expected to be hands-on with the new entity. His wealth has recently been estimated at $700 million. Tutor grew up in a middle-class family in L.A.'s San Fernando Valley and worked his way through the University of Southern California where he is now a member of the board of trustees. Two buildings on campus are named after him and others were built by his company.

Disney has been trying to sell Miramax since January in what has been a protracted series of negotiations with different bidders. There are about five unreleased Miramax movies which are expected to be included in the sale.

Carl DiOrio, Paul Bond and Kim Masters contributed to this report.
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