UPDATED with statement from Maria Contreras-Sweet
News that the Weinstein Co. is planning to file for bankruptcy protection came as a shock to the investor group that was working as late as Saturday night on an acquisition deal for the scandal-battered company.
Sources close to the situation said the investor group headed by Maria Contreras-Sweet learned of TWC’s decision via media reports. The TWC board released a letter to Contreras-Sweet and billionaire investor Ron Burkle late Sunday night, but members of the Contreras-Sweet group read the letter via media reports before they received a copy directly from the TWC board.
TWC in the letter said it had no choice but to seek bankruptcy protection because the investor group would not provide an immediate cash infusion to keep the company afloat. The letter questioned the legitimacy of the Contreras-Sweet bid — a suggestion that has greatly rankled the investors.
“I was surprised to read in a publication a letter from The Weinstein Company (TWC) representatives that they were terminating our negotiations to purchase the assets of TWC,” Contreras-Sweet said in a statement issued Monday afternoon. “Based on our discussions, it was my understanding that we were close to signing the transaction documents in a couple of days. Regrettably, it appears that this transaction has now ended.”
Contreras-Sweet, the former head of the U.S. Small Business Administration under President Obama, said her effort to acquire the company now linked inextricably to Hollywood’s culture of harassment run amok was directly inspired by the #MeToo movement that has spurred a national reckoning during the past six months.
“I started down this path with a vision of providing a turning point for the company and, indeed, serve as an example for a cultural reversal in an industry anxious to shed a mantle of shame,” she said. “While the contagion of sexual harassment has infested all industries, I’ve been heartened to see the highly influential entertainment industry become the North Star in this remedial movement. This powerful industry touches the hearts and minds of the global population.”
The TWC board’s move is another curve ball in the stranger-than-fiction saga of the Weinstein Co., which has been in a tailspin since early October when detailed reports of alleged sexual assault and misconduct by co-founder Harvey Weinstein surfaced. The taint from the sordid allegations have turned Harvey Weinstein and his namesake company into a pariah in the entertainment industry. Harvey Weinstein was fired from his post as co-CEO in October. He has maintained that he only engaged in sexual acts that were consensual, a claim disputed by dozens of women going back decades.
Just two weeks ago, the Contreras-Sweet group believed it was hours away from announcing a roughly $500 million acquisition of the troubled company, which was grappling with a looming debt crisis before the Harvey Weinstein scandal erupted. But on Feb. 11, New York Attorney General Eric Schneiderman entered the picture with a civil rights lawsuit against the company and brothers Harvey and Bob Weinstein. The suit called for Schneiderman’s office to monitor aspects of the company after a sale and it questioned the Contreras-Sweet group’s decision to retain former TWC chief operating officer David Glasser as the new CEO. TWC responded to that issue last week by firing Glasser.
After a meeting last Wednesday with Schneiderman’s team, the Contreras-Sweet group was confident that the deal was back on track. Sources said the investor group delivered to TWC an amended deal offer on Saturday night and was awaiting a response. There were no indications from the TWC board that the company’s need for cash was so dire as to force a bankruptcy filing within days. A source close to the situation said the investor group was prepared to provide a cash influx but not until a signed agreement was in place. The moves by Schneiderman earlier this month created a delay in hammering out the fine print of the deal that could prove fatal to Contreras-Sweet’s bid.
As of Monday morning, the investor group was trying to sort out it next steps and determine whether there was any hope of proceeding with the deal. By late afternoon, Contreras-Sweet issued a statement indicating that she was dropping her effort to acquire the company.
If TWC proceeds with bankruptcy filing, it’s unclear if the company plans to pursue a Chapter 11 reorganization plan or a Chapter 7 liquidation effort.
Here is the full statement issued Monday afternoon by Contreras-Sweet:
I was surprised to read in a publication a letter from The Weinstein Company (TWC) representatives that they were terminating our negotiations to purchase the assets of TWC. Based on our discussions, it was my understanding that we were close to signing the transaction documents in a couple of days. Regrettably, it appears that this transaction has now ended.
It is important for me to reiterate the values that have embodied this deal since day one. My initial offer letter dated November 4, 2017, clearly stated my intentions to build a company led by women, to retain the employees, to assume all liabilities and protect small businesses, to create a mediation process for victims and guarantee a litigation fund that would supplement existing insurance coverage. In addition, the cornerstone of our plan was to launch a company that represented the gold standard in governance and transparency.
Inspired by the #MeToo movement, I started down this path with a vision of providing a turning point for the company and, indeed, serve as an example for a cultural reversal in an industry anxious to shed a mantle of shame. While the contagion of sexual harassment has infested all industries, I’ve been heartened to see the highly influential entertainment industry become the North Star in this remedial movement. This powerful industry touches the hearts and minds of the global population.
Today, only 4% percent of venture capital goes to women. I do not believe that women have only 4% of the good ideas.
While our efforts did not materialize as we had hoped, I am grateful for my investors who saw the compelling value of a women-led board. As I have done in the past, in public and private life, I will continue to seek ways to encourage women to take control of their own future, including through business ownership.
I wish all the stakeholders the best possible outcome.