Hunt for Harvey

K-L, Marvel bid for toon licensing firm

A revitalized Marvel Enterprises and L.A.-based film and TV concern Kushner-Locke Co. have joined the hunt for troubled licensing firm Harvey Entertainment.

Kushner-Locke is understood to be one of the financial backers of a bid for Harvey spearheaded by former Live Entertainment chairman Roger Burlage (Daily Variety, March 12).

Marvel, which emerged from bankruptcy late last year and merged with toy manufacturer Toy Biz, is focusing on developing a business around its library of characters, which includes “X-Men” and “Fantastic Four.”

Earlier this month, Marvel pacted with Sony Pictures on a live-action “Spider-Man” franchise. And Twentieth Century Fox is developing three pics based on Marvel properties.

Natural fit

Harvey owns a library of classic cartoon characters such as “Casper,” “Richie Rich” and “Wendy the Good Little Witch,” so it would be a natural fit with Marvel, Wall Streeters said. A Marvel spokeswoman declined comment.

Kushner-Locke’s interest in Harvey is not as clear, although the film and television sales company has been diversifying in the past couple of years and its backing of Burlage may be part of that strategy.

Among other actions, in 1998 K-L launched a movie channel, Grand Canal Latino, in Latin America, and in 1997 it acquired a public-record Internet search service, 1-800-U.S. Search. K-L posted a net loss of $5.9 million for the quarter ended Dec. 31.

Kushner-Locke and Burlage are both associated with Universal Studios, however, which owns 9% of Harvey and has feature rights to the “Casper” franchise. Burlage is in the process of setting up a production deal at U, while Kushner-Locke established its own co-financing deal with U, for pics budgeted under $35 million, in 1997.

Step forward

K-L and U have done nothing under their deal yet but the Harvey bid may be a way of moving that forward. Under their split rights arrangement, Kushner-Locke puts up 55% of a pic’s budget and gets foreign rights, while U puts up the rest of the budget and gets North America.

Kushner-Locke execs could not be reached for comment and Burlage declined comment.

The revival of interest in Harvey, which has been on the market for six months, comes a couple of weeks after Harvey’s deposed CEO Jeff Montgomery surfaced with an audacious offer designed effectively to allow Montgomery to take management control of the company again.

A group of institutional shareholders owning 35% of Harvey is believed to have approached Montgomery, unhappy at the slide in the stock price over the past few months and the apparent lack of interest in the company. Harvey’s stock, which had fallen to a low of $4.50, has perked up in the past couple of days and closed unchanged Wednesday at $6.06.

According to sources, these shareholders are ready to back Montgomery’s offer if there is no alternative. But, now it appears that there are a number of other bids, including several companies whose identity is not yet known.

The big question is the price, of course, as Harvey’s shareholders are thought to want close to $10 a share. At that figure the company would be valued at $40 million, but a revival of Harvey also requires capital investment of $30 million to $40 million, observers believe.

Marvel recently raised $250 million in junk bonds, although it used $185 million to repay debt. That still leaves it with enough cash to pursue a company as small as Harvey, however.