New Line Cinema and Castle Rock Entertainment confirmed Friday they are negotiating with Turner Broadcasting System Inc. regarding a possible acquisition of the companies by Turner, but there are plenty of land mines in the negotiating field.
Neither film company would elaborate on the progress of the talks Friday, but sources said the Turner/Castle Rock discussions have reached an advanced state.
Industry sources and analysts speculate that such a deal would benefit almost all involved parties.
New Line, best known for the “Teenage Mutant Ninja Turtles” and “Nightmare on Elm Street” film series, would have access to Turner’s resources, while Turner would gain entry to the distribution and video businesses. Castle Rock, whose pix include “When Harry Met Sally…” and “A Few Good Men,” gets additional funding for its top-of-the-line product.
Turner would be able to enter the production and distribution arena with established players and could replenish its library. Two of the Turner networks, Superstation TBS and TNT, rely heavily on vintage movies for their programming.
“Turner has milked its library for a lot of its value,” said Ray Katz, an entertainment analyst for Lehman Brothers in New York. “I think that accounts for a lot of the motivation behind the acquisition.”
There are still some trouble spots. Turner Broadcasting’s ownership structure poses potential problems for a deal with a film company, because of Time Warner Inc.
Although a major Turner shareholder — along with the Denver-based Tele-Communications Inc., TW’s Warner Bros. feature division competes with New Line and Castle Rock. While a Time Warner rep declined comment, John S. Reidy, who follows TBS for Smith Barney Harris Upham & Co., doubts the “boutique-like” studios pose a threat to giant Warner Bros. And insiders say TW is not concerned about competing with itself.
TCI execs could not be reached for comment, but that company has less to lose , since the film companies could feed its pay-per-view division.
Another sticking point may be Sony Pictures Entertainment, which, although a 45% owner of Castle Rock, stands to lose a lucrative distribution arrangement.
“Castle Rock has been a strong provider for Columbia,” said one source who declined to speak for attribution. “I don’t think they’ll let the fatted calf get slaughtered without a fuss.”
Columbia execs could not be reached for comment.
Analysts are still uncertain how the publicly held New Line will fare on the stock market. During the last nine months, New Line stock has gone from a low of $ 10 to $ 16.75 on Thursday, then dipped a quarter on Friday.
“How much it goes up depends on how much Turner offers for the stock,” said Alan Gould, an entertainment analyst for Kidder Peabody & Co. in New York.