Nu Image sets sights on First Look

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Avi Lerner's Nu Image is on the verge of becoming the major shareholder of First Look Studios, gaining access to all divisions of the company and merging its library of more than 300 films with First Look's library of more than 700 titles.

Nu Image is expected to raise capital for the deal based on the value of the library and existing assets. Under the deal, the final details of which were being worked out Monday, Nu Image would take former CEO Henry Winterstern's place as the largest shareholder in First Look.

Winterstern resigned from his post this month but stayed on as an adviser. He reacquired Capital Entertainment Group, which he had merged with First Look in 2005.

First Look International is expected to merge with Nu Image's international sales division sometime after May's Festival de Cannes, where the companies will operate separately selling their respective slates.

Neither Nu Image nor First Look executives would comment Monday. It is not known who will become the new CEO replacing Winterstern, who stepped down amid talk of overspending in the face of low boxoffice returns. The board of directors — Chris Cooney, Mitch Goldstein and Chas Phillips — has interviewed at least two outside film industry executives and two First Look execs in the past week, according to a source familiar with the situation, and a decision could come as soon as week's end. Lerner is said not to be interested in the position.

Another outstanding question is whether the company will fold its First Look Pictures theatrical division, sell it or retain it to release big-budget films instead of selling them to the studios.

First Look Pictures president Ruth Vitale resigned March 14 in what she called a "mutual decision" after the board of directors chose to move away from film production. Nu Image formed Millennium Films in 1996 as its film production arm, focusing on high-budget features, and has produced more than 60 films.

Winterstern hired Vitale 16 months ago to run the domestic theatrical division of First Look after merging Capital with First Look in July 2005 to form the new company. Prentice Capital Management was a founding investor, and the company secured an $80 million, three-year credit line from Merrill Lynch in June.

The current situation is a sharp turnaround from several weeks ago, when First Look was considering buying Lerner's slate of films under Winterstern's direction. "There was a noose put around (Winterstern's) neck by pushing so hard for it," said one source, who said the board balked at the decision. The former CEO said it was his decision, because he had formed the company, to find a new CEO and step down from his post.

The gap between what Millennium was asking for its library — about $300 million — and First Look's willingness to cover only a third of that made the deal unlikely from the start. "When we heard that we were going to have a deal with them, we laughed," Lerner said at the time of Winterstern's departure, adding that he had been talking with several companies about the sale of his film slate.

To date, less than five people have been laid off at the company, but a source familiar with the situation said further cuts would likely occur down the road on the operational side of the company, including accounting.
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