Weinstein Co. Sale Talks Collapse: No Choice but to Pursue Bankruptcy

From left to right: Paul Morigi/WireImage, Neilson Barnard, Duffy-Marie Arnoult, all Getty Images
From left: Maria Contreras-Sweet, Harvey Weinstein and Ron Burkle

The TWC board blasted potential buyers Maria Contreras-Sweet and Ron Burkle in a Sunday night letter: "We must conclude that your plan to buy this company was illusory and would only leave this Company hobbling toward its demise to the detriment of all constituents."

The Weinstein Co. appears headed for bankruptcy four months after larger-than-life film mogul Harvey Weinstein was brought down by multiple allegations of sexual misconduct and assault.

Dropping a Sunday night bombshell, the board of TWC said it has no choice but to pursue bankruptcy in a sharply worded letter rebuking potential buyers Maria Contreras-Sweet and Ron Burkle, who were part of a group of investors looking to redeem the film and production company.

"While we deeply regret that your actions have led to this unfortunate outcome for our employees, our creditors and any victims, we will now pursue the Board’s only viable option to maximize the Company’s remaining value: an orderly bankruptcy process," the letter stated.

Continuing, the board said, "we must conclude that your plan to buy this company was illusory and would only leave this Company hobbling toward its demise to the detriment of all constituents." The terse letter maintained that the bidders reneged on an agreement to provide an infusion of cash to keep the company afloat while the proposed sale closed.

The dramatic turn of events, and finger pointing, comes several day after Contreras-Sweet — a former Obama administration official who is leading a group of investors who would take a 51 percent stake in the company and install a female-majority board — met with New York State Attorney General Eric Schneiderman to address his concerns about a victims fund and the vision for the new company. Burkle, a minority investor, also attended the meeting. 

Earlier this month, Schneiderman effectively blocked the sale when filing a sweeping civil rights lawsuit against TWC, Harvey Weinstein and Bob Weinstein.

On Monday, the AG's office said it was disappointed by the board's action, and pledged to pursue its lawsuit.

“Over the past two weeks, we had very productive discussions with both parties about accomplishing the Attorney General’s goals of compensating victims, protecting employees, and rooting out those who enabled years of sexual abuse at the Weinstein Company. We are disappointed that despite a clear path forward on those issues—including the buyer’s commitment to dedicate up to $90 million to victim compensation and implement gold-plated HR policies—the parties were unable to resolve their financial differences," director of communications and senior counsel Eric Soufer said in the statement.

"We will continue to pursue justice for victims in the event of the company’s bankruptcy, and our investigation into the pattern of egregious abuse by Harvey Weinstein and his enablers is ongoing," Soufer continued.

A source close to the sale process said the board's letter caught Contreras-Sweet and Burkle by surprise. The insider added that various delays, including the AG's lawsuit, caused TWC to need cash before an agreement be reached. Separately, the bidders became increasingly concerned that more issues could arise.

In Sunday's letter, the board wrote that since the time of the Feb 21 meeting, "we and our advisors have worked tirelessly to finalize an agreement to present to the Attorney General for his approval. While acceding to virtually every demand you imposed, we made clear that the one thing the Company needed in furtherance of your good faith was interim funding to run our business and maintain our employees — employees who have remained dedicated to the Company even amidst great uncertainty. During this time, we waited patiently for you to deliver the terms you represented would save this Company from certain bankruptcy."

The board claims that Contreras-Sweet and Burkle responded with an "incomplete document that unfortunately does not keep your promises of February 21, including with respect to the guiding principles set forth by the Attorney General. Nowhere, for instance, is there any provision for the 'gold standard' human resources policies you promised; instead, you added all new contingencies relating to David Glasser, the former employee of The Weinstein Company who was recently terminated for cause. Likewise, there is no provision for necessary interim funding to ensure your future employees were paid; instead, you increased the liabilities left behind for the Company, charting a financial path that will fail. Other new conditions make clear that a closing, if one were to happen at all, could take many months (or longer). In short, the draft you returned presents no viable option for a sale."

In a statement, Contreas-Sweet said she was "surprised" by the board's letter, adding, "Based on our discussions, it was my understanding that we were close to signing the transaction documents in a couple of days. Regrettably, it appears that this transaction has now ended."

The previous week, the remaining members of the board, including Bob Weinstein, fired COO David Glasser for "cause," but offered no further explanation. On Wednesday, Glasser stated that he is planning to file his own lawsuit against TWC alleging wrongful termination, retaliation, breach of contract and defamation. The lawsuit will name the board members personally and will seek damages in excess of $85 million.

Feb. 26, 9:35 a.m. Updated with AG statement.

Feb. 26, 1:45 p.m. Updated with Contreras-Sweet's statement.

Read the full letter below.

Ron, Maria,

In a meeting with New York’s Attorney General on February 21, you asked The Weinstein Company to work with you as “partners” toward the common goal of saving the Company, preserving jobs and establishing a victims’ fund. Given the Company’s financial condition, you urged that “time is of the essence” and represented that you were prepared to enter an agreement promptly. That agreement, we were told, could no longer impose any closing obligation or reverse break-up fee; instead, Maria assured us that the Company could — and must — rely on buyer’s good-faith intention to sign and close the deal. We mutually agreed that parties should have open and free communication with the Attorney General’s office, and any other governmental body with an interest in the transaction.

In the four days since that meeting, we and our advisors have worked tirelessly to finalize an agreement to present to the Attorney General for his approval. While acceding to virtually every demand you imposed, we made clear that the one thing the Company needed in furtherance of your good faith was interim funding to run our business and maintain our employees – employees who have remained dedicated to the Company even amidst great uncertainty. During this time, we waited patiently for you to deliver the terms you represented would save this Company from certain bankruptcy.

Instead, late last night, you returned to us an incomplete document that unfortunately does not keep your promises of February 21, including with respect to the guiding principles set forth by the Attorney General. Nowhere, for instance, is there any provision for the “gold standard” human resources policies you promised; instead, you added all new contingencies relating to David Glasser, the former employee of The Weinstein Company who was recently terminated for cause. Likewise, there is no provision for necessary interim funding to ensure your future employees were paid; instead, you increased the liabilities left behind for the Company, charting a financial path that will fail. Other new conditions make clear that a closing, if one were to happen at all, could take many months (or longer). In short, the draft you returned presents no viable option for a sale.

We have believed in this Company and in the goals set forth by the Attorney General. Based on the events of the past week, however, we must conclude that your plan to buy this company was illusory and would only leave this Company hobbling toward its demise to the detriment of all constituents. This Board will not let that happen. Despite your previous statements, it is simply impossible to avoid the conclusion that you have no intention to sign an agreement – much less to close one – and no desire to save valuable assets and jobs. That is regrettable, but not in our power to change.

While we deeply regret that your actions have led to this unfortunate outcome for our employees, our creditors and any victims, we will now pursue the Board’s only viable option to maximize the Company’s remaining value: an orderly bankruptcy process.

The Board of Representatives
of The Weinstein Company