Ending a yearlong search for a buyer, Andy Vajna is close to a deal for the sale of Cinergi Pictures Enter-tainment Inc. to Walt Disney Co., sources said late Thursday. The agreement could be completed as early as next week.
The deal will give the Mouse House access to Cinergi’s small library, which includes pictures such as “Nixon” and the recently released “Evita,” as well as a small amount of cash that should offset the purchase price, which is likely to be about $20 million. Cinergi closed up 3¢ Thursday at $1.31, valuing the company at $18 million. Cin-ergi is 58% owned by Vajna.
The deal would culminate more than six months of discussions between Disney and Cinergi (Daily Variety, Aug. 15).
Although other potential suitors have flirted with acquiring Cinergi, Disney is the most logical buyer. Disney has a 25-picture distribution deal with the indie, of which about 16 pictures are outstanding, and is owed production ad-vances totaling $35.4 million as of Sept. 30, 1996. Disney also owns just under 5% of Cinergi’s stock and had been lending Cinergi money to help fund its production costs.
Cutting red tape
Absorbing Cinergi allows Disney to avoid entanglements with another buyer or the expense of winding down the company, which had become an option in recent weeks, Wall Street sources said, given its failure to find another buyer.
Since Cinergi put itself on the market as part of a “strategic review” last spring, Vajna and his advisers have met with everyone from Disney to Arnon Milchan’s New Regency Enterprises to Mike Medavoy’s Phoenix Pictures and more recently, sources said, with Jim Robinson at Morgan Creek Prods.
Most of the companies were attracted primarily by Cinergi’s stock-market listing. The company’s library was con-sidered too small to be of much value — its biggest hit, “Die Hard With a Vengeance” is not included because U.S. distribution rights in all media are owned by 20th Century Fox, which jointly owns the copyright with Cin-ergi, according to SEC filings.
Most of its other releases, which include “Medicine Man,” “The Color of Night,” “The Scarlet Letter,” “Judge Dredd” and “Nixon” did poorly. Cinergi’s best year was 1994, when it made $2.8 million. It lost $16 million in 1995 and another $1.6 million in the first nine months of 1996 (It has yet to report for the fourth quarter.).
Change of heart
Disney considered a deal last summer but did not proceed. It is not clear what brought about the change in thinking other than the prospect of having to recoup its production advances from a company in a liquidation.
Disney has remained close to Cinergi in recent months, however. Vajna’s company took on half of the equity of “Deep Rising” and is handling the picture’s international distribution. Disney also is sure to be pleased with the performance of “Evita,” which so far has grossed $132 million worldwide.
“Evita” seems likely to ensure Cinergi has a strong fourth quarter. Still, uncertainty about the company’s future has pushed the stock price down in recent weeks from around $2 last fall.
Wall Streeters close to Cinergi had argued for most of last year that the indie faced no imminent financial prob-lems. While it has bank debt of $23 million as of Sept. 30, these loans are repayable only out of distribution ad-vances on the pictures.
Cinergi may have faced some costs associated with the production halt on “Broadway Brawler,” although sources said those costs should be covered by a completion bond company.
Out of time
It may simply have been that Cinergi’s time was running out. Its bank facility was up for renegotiation by Aug. 31, requiring some decisions on its future strategy. And the problems prompting the company to review its future, including looking for buyers, had not changed — production and marketing costs had risen to a level that made it hard for Cinergi to continue doing the big-budget pictures Vajna likes to do.
Lately, Cinergi had focused on doing smaller budget pictures, but people close to Cinergi predicted Vajna was not going to be satisfied doing those.
The consequences of Disney’s move on the international front will be strongly felt by overseas distribs for whom Cinergi was a major supplier of big-budget studio-level pics. Disney execs declined comment, while Cinergi execs did not return calls Thursday.