European broadcaster Compagnie Luxembourgeoise de Telediffusion is part of a group considering taking a stake in New Line Cinema, according to people close to the situation. The production company was put on the auction block by Time Warner late last year.
After one of the quietest marketing campaigns in recent Hollywood history, bids for New Line are due in about a week. The conventional wisdom on Wall Street and in Hollywood is that Time Warner will come up empty-handed, but people involved with the sale insist that there are two or three groups of investors considering bids.
The identity of the investors has remained a well-kept secret, which has bred widespread skepticism about prospects for a deal. It is understood, however, that New Line chairman Bob Shaye and president Michael Lynne traveled to Europe earlier this month to meet with potential investors, who include CLT. The European broadcaster was part of a consortium led by NBC that took a look at MGM last year. That consortium was put together by investment bank Furman Selz, which is advising Time Warner on the sale of New Line.
Sources say CLT is “seriously interested” in taking a stake in New Line, although how much and at what price is not known. CLT’s involvement means it is likely that Bertelsmann AG is involved; CLT recently merged with Bertelsmann’s audiovisual Ufa division (Daily Variety, Dec. 9). People close to New Line put valuations on the indie as high as $1.2 billion last fall, but now the best bet is no higher than $750 million. And that’s the value put on the whole company, although any deal is likely to be for sale of a significant chunk with Time Warner re-taining a minority stake.
New Line’s performance suffered in 1996 from some big-budget failures, which brought down its price somewhat. And unlike MGM, New Line has a relatively small library — which limits the amount of debt that can be raised from the back of the company. Potential buyers also have to figure into their calculation New Line’s cash needs, which total several hundred million dollars a year.
While all this is going on, Time Warner is exploring financing options for New Line should it choose to hold onto the company. A key requirement by Time Warner in this circumstance is that any debt raised by New Line be non-recourse to Time Warner’s balance sheet, so it won’t add to Time Warner’s considerable debt load.
Bankers estimate New Line could probably raise $400 million off its own balance sheet, secured against a combination of its library and receivables. New Line declined comment, and a Time Warner spokesman would say only that the company was “exploring all options” and nothing was decided.
If Time Warner did decide to hold on to New Line, it would undoubtedly be only an interim measure until the in-die’s performance improved sufficiently to allow a public offering or an outright sale. In the same vein, Time War-ner has apparently decided to keep Castle Rock as part of the Warner Bros. stable, but it is also looking for both off-balance-sheet debt and outside equity to finance Castle Rock.