Island World, the indie film empire founded by entrepreneurs John Heyman and Chris Blackwell, will form a European joint venture with Babelsberg Studios for the development, production and co-financing of films.

The joint venture will have an initial capitalization of $ 250 million, raised from investors in Germany. Films produced by the new company will not carry the Island World label and will be separate from the company’s other production activities.

This week Heyman will announce the closure of Island World’s London filmmaking operation, which has produced “Juice” and “Carry on Columbus.” From now on the company’s film production will be consolidated in Hollywood under chief operating officer Eric Eisner.

Babelsberg Island World’s New York production base effectively closed last fall with the departure of vet producer David Brown.

The closure of the London filmmaking operation will result in the departure of film honcho Margaret Matheson. From May 1, Matheson will pursue her movie ambitions as an indie producer.

Tony Garnett, who has worked alongside Matheson in the London office, will stay on to supervise Island World’s television operations.

Island World’s London office also has developed a business media section making industry management and training films.

Matheson described her departure as “entirely amicable.”

The consolidation of Island World’s movie activities in Hollywood probably will mean a focus on more straightforwardly commercial fare than the company has been involved with hitherto.

Island World has produced or co-financed an offbeat slate of films with mixed commercial results. Among them are “Toy Soldiers,””Juice” and “Mac.”

It is not clear how the Babelsberg joint venture will operate. Given Heyman’s track record as an innovative financier, it is likely that the investment will be linked to redevelopment of the massive site. The studios, which date back to 1912, are Europe’s biggest.

“Right now they are investing $ 37.5 million bringing Babelsberg up to standard,” said Heyman.