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Firm handshake seals AMG deal

Long-awaited $12 mil pact inked; integration awaited

Ending a year-long hunt for suitors, beleaguered Artists Management Group co-founder Michael Ovitz will sell his interest in the company to the Firm, the 4½-year-old production and management concern owned by Jeff Kwatinetz. Deal, which insiders put at roughly $12 million, has been anticipated for weeks (Daily Variety, April 28).

Several AMG businesses and executives will be integrated into the Firm, including AMG’s feature talent management division, its literary division, music and television management and the Renaissance publishing group.

AMG co-founder Rick Yorn will be named co-chairman of the board of directors and AMG co-founder Julie Silverman-Yorn will sit on the Firm’s executive committee.

“With the current global consolidation of advertising and media companies into vertically integrated entities, artists are at an economic and creative disadvantage,” said Kwatinetz. “This merger allows us to level the playing field for the artistic community and represents a necessary shift toward increasing artist empowerment.”

Excluded from the AMG/Firm pact are Artist Production Group (APG), the motion picture production arm led by Mark Canton; AMG Animation and Family Entertainment; AMG Sports; and AMG’s urban music shingle Violator, all of which will become separate entities unaffiliated with the Firm.

Ovitz was not available for comment late Sunday afternoon. But in a statement he said, “AMG was formed to build an entertainment company that offered greater opportunities for clients. This new partnership with the Firm and AMG is a major step in achieving that goal.”

In the statement, Ovitz, 55, went on to add that he thought the new company would be “a very strong entertainment and brand management company,” one that would “have the resources to build a diverse and creative company” and that he wished “all the success in the future.”

Despite the deal, many questions remain: What will become of Ovitz mega-clients like authors Tom Clancy and Michael Crichton? Neither Kwatinetz nor Rick Yorn would say if they would be joining the Firm. And what will become of Ovitz?

The AMG divisions merging with the Firm include Cameron Diaz, Benecio Del Toro, Leonardo DiCaprio, Samuel L. Jackson, Sarah Michelle Gellar, Natalie Portman, Milla Jovovich and Laura Linney.

The Firm itself reps a smaller list of actors, with clients including Martin Lawrence and Vin Diesel, but also has a clutch of hot music acts like Korn, the Dixie Chicks, Linkin Park, Stone Temple Pilots and Limp Bizkit.

“Separately, the list of clients on both sides of the equation are very impressive,” said Rick Yorn, “but together, matching strength with strength, it is awe-inspiring. We are excited by the possibilities for our clients and our new company and working with some of the most creative and experienced managers in the business.”

Amid news of the merger, many at AMG were nervously wondering about their futures late Sunday. It remains unclear how many of AMG’s employees in departments involved with the merger would ultimately make the shift with the Yorns.

“We’re figuring that out,” said Julie Silverman-Yorn, adding that “the majority” would be coming to the Firm. In a joint statement released Sunday, the companies said that “any formal structural and organizational developments regarding the Firm/AMG business combination will be announced at a later date.

If the AMG divisions being sold do retain all their personnel, over 70 AMG employees would join the Firm’s 100 staffers in Los Angeles, London and New York, adding up to a newly merged entity with some 200-odd managers and production execs, according to Firm insiders.

Also in question is what may become of APG, the motion picture division led by Canton that is not part of the deal. Insiders familiar with the company said Canton has been planning a merger or outright purchase of APG from Ovitz, but an AMG spokesman could not confirm that Sunday.

Formed in 1999, AMG was to have been the return to the power base on which Ovitz had built his reputation — and a considerable fortune — after failed attempts to run Walt Disney Co. and take over Livent, a live theater company that went bankrupt after accounting irregularities surfaced.

But in March, AMG’s production division, APG, lost its financing from StudioCanal, fueling speculation that a sale or merger with a strategic partner might be imminent.

Canton, reached at home, said talk of his buying APG was “ahead of the curve” but did say that a name change could be in the offing.

“We both feel this needs a fresh coat of paint,” said Canton of his talks with Ovitz regarding APG. Asked if Ovitz was planning on leaving Hollywood for the graceful exit posited in many media outlets, he answered: “He has not expressed to me a desire to leave the business, but I can’t answer what his plans are. We are going to sit down in the next few days and talk about what is best for APG.

“The rest,” he said, “is speculation.”

Volatile dealmaker

Kwatinetz and then-partner Michael Green created the Firm in fall 1997. Though it began with a roster than included Martin Lawrence and music act Korn, its early days were difficult ones. Almost immediately, their former employer, producer and manager Sandy Gallin, filed a lawsuit seeking $1 million in compensatory damages and punitive damages for what Gallin called the pair’s “despicable and untrustworthy conduct.”

That lawsuit was settled, but it introduced Hollywood to Kwatinetz as a resolute and sometimes contentious dealmaker.

Last year, Kwatinetz reinforced that image when he ran into trouble with Firm investor Robert Sillerman. As the head of concert juggernaut SFX Entertainment, Sillerman had purchased 16% of the Firm for $25 million. Sillerman had planned to buy the rest of the Firm for $200 million but later said he had to shelve that deal because it ran afoul of a non-compete clause with Clear Channel Communications, to which he’d sold his SFX in 2000 for $4 billion.

Kwatinetz filed suit in Los Angeles Superior Court, accusing Sillerman of having “misappropriated the Firm’s business plan” and using “his position as a director and shareholder of the Firm to pursue his own interests at the Firm’s expense.”

In an extraordinary U-turn last August, however, Kwatinetz issued an unqualified apology, agreeing to cover Sillerman’s legal expenses and even donating an undisclosed sum to the Marine Science Scholarship Fund at Long Island U.’s Southampton College, where Sillerman is chancellor. Kwatinetz called the suit “without merit and a mistake” and called Sillerman “a true visionary” with whom he was “certain we will do business…in the future.”

Kwatinetz has since bought out Sillerman’s stake in the Firm.

Kwatinetz, 37, told Daily Variety that he rejected media reports categorizing him as “headstrong” and “difficult” and bent on building a media conglomerate resembling an AOL Time Warner. (Besides management, the Firm also owns or co-owns record labels, like Korn’s Elementree, represents sports figures, has a joint venture with children’s retailer Build-A-Bear Workshop and owns athletic brand Pony.)

“We vigilantly represent our clients, and sometimes, people take that as headstrong. But this isn’t about Jeff Kwatinetz, or Rick, or Julie,” Kwatinetz said. “And I think ‘conglomerate’ is a bad word for what we’re trying to do. It’s about surrounding ourselves with people we think are visionary and approaching our clients as businesses in and of themselves. The focus is never on quantity of clients.”