Classic cooks Harvey stake

Group's $30 mil outbid eight other possible suitors

A group led by former Golden Books chief Eric Ellenbogen and featuring entertainment heavyweights Frank Biondi and Steve Tisch on Thursday agreed to buy a majority stake in comic-characters licensor Harvey Entertainment.

Classic Media, a newly created investment group, signed a letter of intent to acquire 60% of the Los Angeles-based company in a cash-and-stock deal valued at about $30 million, officials said. Though it was unclear if current management including chairman Roger Burlage would be leaving, Ellenbogen said the new majority owners plan to be hands-on after taking control.

“We’re not passive investors,” he emphasized.

Biondi, the former Universal and Viacom exec, is participating in the Classic Media investment through his Waterview Partners venture firm, and Tisch will get a Classic Media board seat on behalf of a Tisch family investment.

An investment group led by Burlage, who previously was chairman of Live Entertainment, paid $17 million for a 37% controlling stake in Harvey in April 1999.

Best combination

“Our board of directors felt that this proposal represented the best combination of capital, new management expertise and likelihood of consummation,” Burlage said in a statement announcing the letter of intent with Classic Media.

“We need to pop the hood and get in there and do our due diligence,” said Ellenbogen, who was CEO of Golden Books from 1996-1999 and also served as chief of Marvel Enterprises for a brief time after that comics-and-licensing company emerged from bankruptcy reorganization in 1999.

Previously, Ellenbogen was head of Broadway Video, which sold its TV library to Golden Books for $91 million in 1996.

The Harvey sale is believed to have attracted at least eight bids for all or part of the company. One of the bidders, Canadian producer and distributor Lions Gate, initially was thought a leading candidate to acquire Harvey, but its offer ultimately was found wanting, sources said.

Stock and cash

The Classic Media transaction, which is expected to close by year’s end, would involve a $26 million cash payment and all of the stock in UPA Industries, which owns rights to the Mr. Magoo comic character. Ellenbogen and Classic Media acquired UPA and its Magoo rights from the estate of longtime owner Henry Saperstein.

Harvey licenses comic characters such as Casper the Friendly Ghost and Richie Rich for film and TV projects, but its constant impoverishment has prevented its taking on capital-intensive film production of its own.

Though that could change with new deep-pocketed owners, an analyst noted that publicly traded production companies have had a checkered history on Wall Street.

“The notion that you need some sort of a public vehicle to go out and produce is a sketchy one,” said Arthur Rockwell of Rockwell Capital Management in Los Angeles. “There haven’t been too many successful examples. You have to have a successful track record in order to attract new capital through the public marketplace.”

Harvey announced the Classic Media deal after the close of market trading. Its shares were up 25¢ in trading twice the normal volume to close at $2.75.

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