UPDATED: In a surprise turn of events that mixes New York politics and an epic showbiz scandal, a $500 million deal to acquire the Weinstein Co. is now on “life support” because of the lawsuit filed Sunday by the state attorney general against the company and its founders, Harvey and Bob Weinstein.
Sources close to the situation said the prospects for the acquisition going through were looking slim on Monday after New York Attorney General Eric Schneiderman held a news conference Monday afternoon to detail his objections to the sale. The investor group headed by Maria Contreras-Sweet was frustrated by the situation and what they characterized as the lack of opportunity to discuss a compromise before Schneiderman filed the suit on Sunday. The existence of the suit makes it nearly impossible for the deal to move forward or for the Weinstein Co. to avoid bankruptcy, unless a settlement can be reached.
One source familiar with Contreras-Sweet’s thinking described the sale process as being on “98% dead and on life support” while the investors try to figure out their options. A rep for Contreras-Sweet declined to comment.
The group includes Ron Burkle’s Yucaipa Co. and Dallas-based private equity firm Lantern Capital as minority investors. Contreras-Sweet is said to have raised about 65% of the funding for the deal through her contacts in the venture capital arena and from prominent women in entertainment and philanthropy. Her goal was to revive the beleaguered studio with a new name and a largely female-led management team.
Contreras-Sweet and Weinstein Co. had been working toward announcing the deal on Feb. 11 or Feb. 12. But the state’s legal maneuver threw an 11th-hour wrench in that plan. The Weinstein Co. has been in freefall for months, ever since damning exposes of alleged sexual assault and harassment by Harvey Weinstein were published in October. Harvey Weinstein, who was fired from the company in October, has denied most of the allegations.
Schneiderman’s lawsuit has exposed several big points of disagreement among the key players in the Weinstein Co. deal. The attorney general said one of his concerns about the sale was the lack of funds to compensate alleged victims of Harvey Weinstein, who are sure to come forward with civil litigation. The other red flag was the plan to keep most of Weinstein Co.’s senior managers in place and to name David Glasser, longtime COO, into the CEO role previously held by the Weinstein brothers. Schneiderman’s suit, the result of a four-month investigation into Weinstein Co. operations, makes the case that Glasser, Bob Weinstein, and others should have done more to stop Harvey Weinstein’s alleged misconduct.
The Contreras-Sweet camp maintains there is $50 million allocated as part of the deal for victim compensation, and that money is on top of the company’s existing insurance policies. Sources close to the investor group also disputed Schneiderman’s assertion at the press conference that a lawyer for the group told the attorney general’s staff during the weekend that they had no intention of talking with his office.
Finally, there is a major dispute on whether the Weinstein Co. board blocked Contreras-Sweet from speaking with the attorney general’s office earlier this month when the outreach was first made with the warning of an impending lawsuit. Sources close to the investor group insist Contreras-Sweet and her team were blocked by the Weinstein Co. board from engaging with the attorney general until Feb. 10, hours before the suit was filed, because all sides had agreed to a non-disclosure agreement as part of the deal negotiations.
Bob Weinstein told Deadline on Sunday that there was no such restriction on Contreras-Sweet. “That is a lie, totally untrue,” Bob Weinstein told Deadline. “In fact I vigorously supported Maria and Ron Burkle talking to the AG and being fully transparent.”
Schneiderman’s aggressive move in filing the civil rights lawsuit — rife with lurid details of Harvey Weinstein forcing employees to help arrange sexual conquests and other violations of state civil rights and gender discrimination laws — on the eve of the sale was derided by those close to the sale process as an effort to score political points and grab media attention. If the sale falls through and Weinstein Co. is pushed into bankruptcy, victims will likely have a longer wait for compensation through the company, these sources noted.
A source told Variety on Thursday that the Contreras-Sweet bid group has reached out to the attorney general’s office to arrange a meeting. The meeting would be held sometime within the next few days, according to a source familiar with the situation, meaning that any decision on whether to go forward or abandon the bid likely will not happen before then.