Female-led investor group scraps deal for Weinstein assets

[March 07, 2018]   By Greg Roumeliotis and Karen Freifeld

(Reuters) - The female-led investor group that had agreed to buy The Weinstein Company's assets pulled its offer on Tuesday, and lead investor Maria Contreras-Sweet said the decision was made after the group "received disappointing information."

Two sources familiar with the matter told Reuters that the investor group pulled the offer after discovering the Hollywood studio's liabilities were higher than previously disclosed.

The Weinstein Company board said it would keep working to "determine if they are any viable options outside of bankruptcy."

Contreras-Sweet, a former Obama administration official, said she still believed in the vision of a studio led by women and will consider buying assets if they become available in bankruptcy court.

More than 70 women accused The Weinstein Company co-founder Harvey Weinstein, who was one of Hollywood's most influential men, of sexual misconduct, including rape. Weinstein has denied having non-consensual sex with anyone.

The Weinstein Company, which fired Harvey Weinstein in October, had been planning to file for bankruptcy when Contreras-Sweet struck the deal last week.

The investors found that the company's debt was $280 million rather than the $225 million previously disclosed, one of the sources told Reuters. A second person said that there were previously undisclosed obligations for royalties and other outstanding work payments, accounts payable and a commercial arbitration award.

"After signing and entering into the confirmatory diligence phase, we have received disappointing information about the viability of completing this transaction," Contreras-Sweet said in the statement.

"We will consider acquiring assets that may become available in the event of bankruptcy proceedings, as well as other opportunities that may become available in the entertainment industry," she added.

In its statement, The Weinstein Company board said the claim that investors discovered new information was an "excuse," it believed the buyer had never any intention of following through, and said the company had been transparent about its financial condition.

"We will continue to work tirelessly - as we have for months - to determine if there are any viable options outside of bankruptcy," the board said. "In the meantime, we continue to pursue an orderly bankruptcy process to maximize the company's value."

Lions Gate Entertainment Corp <LGFa.N> had made an earlier offer for some of the company’s assets, as had Qatar-owned film company Miramax, which was originally founded by Harvey Weinstein and his brother Bob Weinstein. Both could be among potential bidders if assets come up for sale in bankruptcy.

Representatives for Harvey Weinstein and Lions Gate did not immediately respond to requests for comment. A Miramax spokeswoman had no comment.

Contreras-Sweet, who headed the Small Business Administration under former President Barack Obama, last week said her investor group had reached an agreement, with help from the New York state attorney general's office, to buy assets from The Weinstein Company to launch a new firm with a majority-female board.

Launched in October 2005, the studio produced and distributed critically acclaimed hits including "The King's Speech" and "Silver Linings Playbook," as well as TV series such as long-running fashion reality competition "Project Runway."

New York Attorney General Eric Schneiderman said at the time he had received commitments that a well-funded victims compensation fund would be created, new policies would protect employees and "bad actors" would not be unjustly rewarded.

"We'll be disappointed if the parties cannot work out their differences and close the deal," Amy Spitalnick, a spokeswoman for Schneiderman, said on Tuesday.

Schneiderman has filed a lawsuit against the company and Bob and Harvey Weinstein, alleging that Harvey Weinstein sexually harassed employees and the company failed to respond. Bob Weinstein co-founded the company and is co-chairman. The lawsuit remains active, Spitalnick said.

(Reporting by Greg Roumeliotis in New York, Karen Freifeld in Washington, Lisa Richwine in Los Angeles and Sangameswaran S in Bengaluru; Writing by Lisa Richwine; Editing by Peter Henderson and Leslie Adler)

[© 2018 Thomson Reuters. All rights reserved.]

Copyright 2018 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.