Planned Sale of Weinstein Company Collapses Again as Investors Back Off
Posted March 6, 2018 7:54 p.m. EST
Updated March 6, 2018 7:59 p.m. EST
LOS ANGELES — The planned sale of The Weinstein Co. collapsed yet again on Tuesday, when the investor group that had agreed to purchase the embattled studio said that it had called off the deal after receiving “disappointing information.”
The investor group, led by Maria Contreras-Sweet, who ran the Small Business Administration under President Barack Obama, and The Weinstein Co.'s board announced last week that an agreement to buy most of the assets of the near-bankrupt studio had finally been reached. The deal called for the group to pay off The Weinstein Co.'s debt, which it believed totaled around $225 million. In return, the group would receive the majority of the studio’s assets, which include “Project Runway” and a 277-film library.
But once the buyers began confirmatory diligence on the deal, they discovered that The Weinstein Co. had more debt than they had been led to believe, according to two people briefed on the matter, who spoke on the condition of anonymity to discuss confidential information. Additional liabilities between $55 million and $65 million were discovered, including $27 million in unpaid residuals and profit participation, and $20 million in accounts payable.
A spokeswoman for The Weinstein Co. had no immediate comment. Contreras-Sweet declined to discuss the decision beyond a statement issued by the investor group, which included billionaire Ron Burkle, who has a long history with The Weinstein Co., and Lantern Capital, a Texas private-equity firm.
“I believe that our vision to create a women-led film studio is still the correct course of action,” Contreras-Sweet said in the statement. “To that end, 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.”
Contreras-Sweet went on to thank numerous parties, including Burkle and Tarak Ben Ammar, a Franco-Tunisian financier and film producer who is one of three remaining members of The Weinstein Co.'s board. Conspicuously absent were the other two: Lance Maerov, an executive at the advertising giant WPP Group, and the co-owner Bob Weinstein, who has been struggling to keep the studio afloat since October, when The New York Times and The New Yorker disclosed decades of sexual harassment allegations against his brother, Harvey Weinstein.
Harvey Weinstein has denied engaging in “nonconsensual sex.”
The on-again, off-again effort by Contreras-Sweet’s group to buy most of The Weinstein Co.'s assets hit its first big snag last month. Eric T. Schneiderman, the New York attorney general, filed a lawsuit against the company and the Weinstein brothers on Feb. 11 alleging that they had violated state and city laws barring gender discrimination, sexual harassment and coercion.
At the time, Schneiderman said that the deal being discussed between Contreras-Sweet and The Weinstein Co. was unacceptable because it did not adequately compensate victims, protect employees and ensure that those who enabled or perpetuated Harvey Weinstein’s conduct would not be rewarded.
The Weinstein Co. and the investor group moved to address those concerns, but the studio’s board announced on Feb. 25 that it would file for bankruptcy because Contreras-Sweet had not delivered on a promise to fund the studio’s operations until a transaction was completed.
Schneiderman got the deal back on track late last week, when he hosted a meeting between the two sides at his offices. He did so after the buyers and sellers had committed to terms that satisfied his concerns.The deal reached in that meeting, for instance, included a victims’ fund worth up to $90 million. Harvey and Bob Weinstein, who jointly own about 42 percent of The Weinstein Co., would receive no cash from the sale.
Amy Spitalnick, the press secretary for the attorney general, said that Schneiderman’s lawsuit against The Weinstein Co. and the Weinstein brothers remained active and an investigation into wrongdoings at the studio was ongoing.
The attorney general’s office also did not rule out the possibility that an already protracted sale process could have further twists. “We’ll be disappointed if the parties cannot work out their differences and close the deal,” Spitalnick said.
After failing to find other buyers who would keep the studio intact — Lionsgate, Shamrock Capital Advisors, Killer Content and the Qatari company beIN Media Group were among those considering various pieces — The Weinstein Co. board entered into exclusive talks with Contreras-Sweet’s group in January.
Contreras-Sweet has no experience in Hollywood, but is known in business and political circles. Much of her business career was spent at a California 7Up bottler, according to her website.
She then ran the California Business, Transportation and Housing Agency. After that, she co-founded a private equity firm and in late 2006 founded ProAmerica Bank, which focused on Latino small business owners.