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Goldwyn’s ‘for sale’ sign

Seagram Co.’s MCA Inc. and Polygram have joined the line of studios taking a look at financially troubled indie Samuel Goldwyn Co., Wall Street sources say.

Interest in Goldwyn, the last of the true Hollywood independents, picked up last week after Daily Variety reported that the company had given up on its plans to look for a European strategic partner and instead had hired investment bank Furman Selz to focus on finding a buyer.

Sources close to Goldwyn insist there is no certainty that a sale will be completed. “If they don’t get the right price, they do have alternatives,” said one person close to the company, adding that a sale was likely to be “the most attractive” alternative.

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Goldwyn may have little choice but to accept the best offer it gets. It was the company’s banks, led by Bank of America, that pressured Goldwyn into abandoning its European partner strategy and moving forward with a sale, Wall Street sources say.

The banks are owed at least $62 million and want their money back by next April at the latest. People close to the company say the banks are being cooperative but other sources say the banks had lost patience with Goldwyn some time after the company’s June 14 announcement that it had financial problems and needed a strategic partner to inject $40 million.

The bank syndicate had already gone further than it wanted in March when it extended the company’s loan for another year after attempts to refinance via a new loan failed. But the banks decided to take a firmer hand after learning that Goldwyn had rejected out of hand approaches from some companies that appeared to be logical partners.

It is not known who the companies were. But Goldwyn quickly began talks with some interested studios, including Paramount, Disney and Turner, sources said, suggesting one or more of these could have made an approach earlier. Goldwyn president and chief operating officer Meyer Gottlieb did not return calls and the banks refused to comment.

Sources say both Goldwyn’s change in strategy and the banks’ tougher attitude may have been influenced by the realization that getting a European partnership would take a long time to structure, one source said. Something Gottlieb may not have realized until a few weeks into the process.

One source said Goldwyn execs may also have changed their minds simply because a June 22 Securities and Exchange Commission filing – which had disclosed details of Goldwyn’s precarious financial position, including statements that it could breach conditions of its credit line as early as June 30 – had hurt confidence in its ability to continue operating. “That started to raise

questions,” one source said.

But Samuel Goldwyn Jr. – who owns 63% of the stock – also may simply have realized there was little chance of luring outside equity without giving up his control of the company.

Having now decided to cede control, Goldwyn is hoping to extract the highest price for the company. But bankers are skeptical of Goldwyn’s chances. Goldwyn stock has already gained ground on reports of the new strategy, rising $.625 a share to close at $7.75 last week, for a total market value of $65 million. Wall Streeters question whether the value of Goldwyn’s assets justify any more of a premium given the $62 million of debt attached to the company.

Bankers estimate Goldwyn to be worth at least $140 million, based just on the value of its two main assets: its film library, technically long-term distribution rights over a group of libraries owned by outsiders, and the 125-screen Landmark chain of arthouse theaters. Goldwyn’s other assets include the right to use the “Samuel Goldwyn” name and logo, as long as Goldwyn Jr. stays as CEO, and movies and TV shows in production.

But it is the library that attracts most of the buyers. A source close to Disney says the House of Mouse’s only interest in Goldwyn is the library, while Turner Broadcasting and Polygram are thought to be interested in it as well. But Paramount is thought to be keen to get into the arthouse movie market, which Sony, Disney and Turner are already in.

Banking sources say the library has been valued at $80 million to $100 million, although sources say this range comes from the company and may not be accepted by potential buyers. Much of the library has been licensed to various cable networks for long-term use, and one banker said Goldwyn may have already been paid for some of these deals – which could reduce the value on the library.

The theaters are easier to value: Producing cash flow of close to $7 million annually gives them a value of around $50 million, bankers say. It’s possible that Goldwyn would sell the theaters separately, sources said.

Valuing the Goldwyn name is a little harder and relies more on the business of whoever ends up owning the company, bankers say. “There is some strategic value in the name,” said one banker, adding that it could be used to launch a cable channel for the right buyer.

Goldwyn’s big hope is that enough serious interest emerges to bid up the price. But investment bankers say one obstacle the company faces will be the tendency on the part of some interested parties to hang back, thinking the price could fall if a deal is slow to develop. All Goldwyn needs to stop that happening is just one committed buyer.

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