Pathe’s Sale of Cannon Pictures Collapses
BEVERLY HILLS, Calif. (AP) _ Pathe Communications Corp.’s deal to sell its 60 percent stake in action film maker Cannon Pictures Inc. fell through when the buyer failed to arrange financing on time, the companies said Monday.
The news was seen widely as another signal that Pathe’s $1.3 billion bid for MGM-UA Communications Co. may be in jeopardy. Also threatened is $200 million in nonrefundable down payments Pathe mogul Giancarlo Parretti already has paid toward the purchase of MGM-UA.
″It sure looks bad,″ said Craig Davis, an analyst of financially troubled special situations for the R.D. Smith & Co. research firm in New York. ″It looks like the money’s practically gone.″
Trihoof Investments B.V. was expected to buy Cannon Pictures. Trihoof’s president, horror film maker Ovidio Assonitis, owns 20 percent of Cannon and had been its chairman and chief executive.
Assonitis ″was severed″ from those jobs and forced off the board of directors, Pathe said in a statement from its Beverly Hills headquarters.
Also fired was Trihoof vice chairman and director William Immerman, who said he and Assonitis were conferring with lawyers about whether their firings breached their contracts with Pathe.
Immerman said Assonitis was in Europe pursuing other financing to replace the money from Los Angeles sources that fell through.
He said Cannon had shut down its marketing and casting operations, apparently trying to cut overhead through layoffs.
″I don’t know what their plans are,″ Immerman said. ″Nobody has told us.″
Neither Pathe’s spokesman, Craig Parsons, nor its general counsel, Edmund Hamburger, could describe the layoffs. Yoram Globus, the former co-owner of Cannon who is now a Cannon director as well as Pathe’s international distribution chief, did not immediately return a phone call.
It was the latest in a series of jolts as Parretti struggles to finance his attempt to buy MGM-UA.
Last month, Pathe said the deal to sell Cannon Pictures and the related sale of Cannon’s headquarters building in Beverly Hills would result in an additional $24 million it could borrow toward the purchase.
Parretti’s chief backer, Time Warner Inc., later filed a $100 million breach of contract suit against Pathe after a stalemate in negotiations for Time Warner to lend Pathe $650 million.
Compared to the need to find a new source for the $650 million, the $24 million is unimportant, Parsons said. ″In the scheme of things, it’s not a crippling event,″ he said.
Parretti’s $200 million in down payments, along with another $53 million from Parretti, is to be distributed to MGM-UA shareholders July 20 under his latest agreement with Kirk Kerkorian, the billionaire who controls MGM-UA.
Many in Hollywood believed Parretti never would have made the $200 million investment without a way to finance the deal.
Time Warner Inc. had agreed to lend Pathe half the money to buy MGM-UA, but only if the rest was in non-borrowed funds, with Pathe putting up $450 million itself. Pathe was unable to do so and failed to persuade Time Warner to renegotiate the equity part of their agreement.