Carolco Pictures and former subsid Live Entertainment agreed in principle to merge Thursday in a tax-free exchange of stock.
The merger is the latest move in a long and complicated relationship between the two companies. Carolco formerly owned 100% of Live’s predecessor, Intl. Video Entertainment.
The producer ceded control of its remaining 37% of Live’s voting stock as part of a bailout of money-losing Carolco by its foreign investors last October.
The merger would result in the creation of a new company, Carolco Entertainment Inc., in which former Live shareholders would own a 22% to 29% stake.
Carolco chairman Mario Kassar would head the new company. The combination is subject to a number of conditions, but Live and Carolco said in a statement they plan to have a definitive agreement worked out within 30 days.
The companies are both controlled by foreign partners: the Japanese electronics concern Pioneer, France’s Canal Plus pay TV network and Italy’s Rizzoli media conglomerate. MGM, which is owned by the French bank Credit Lyonnais, also is a part-owner of Carolco.
Under terms of the deal, Carolco shares will be exchanged for newly issued shares of Live at a rate of 5 A Carolco to each Live share. The companies said the exchange ratio would be adjusted based on the market price of Carolco common stock before consummation of the merger, so that the market value of Carolco shares exchanged for one share of Live will be at least $ 3. But no more than 6. 5 shares and no less than 4.5 shares of Carolco will be exchanged for each Live share, the companies said.
In a related development, Live said it would shed its German video distrib business and its video and music retail stores in the Northeast, resulting in an expected loss of about $ 30 million.