Weinstein Co., the New York studio co-founded by Harvey Weinstein, will file for bankruptcy protection after last-ditch talks to sell its assets to an investor group collapsed, the company's board of directors said Sunday night.
"While we recognize that this is an extremely unfortunate outcome for our employees, our creditors and any victims, the Board has no choice but to pursue the only viable option to maximize the company's remaining value: an orderly bankruptcy process," the board said in a statement.
The decision came after the board was unable to revive a deal to sell the struggling studio to an investor group led by Maria Contreras-Sweet, who ran the Small Business Administration under President Obama from 2014 to 2017.
The bid, backed by billionaire investor Ronald Burkle and Dallas private equity firm Lantern Asset Management, would have given Contreras-Sweet's consortium control of Weinstein Co.'s assets in a deal worth about $500 million. Their bid promised a new era for the once high-flying studio that has been in a tailspin since allegations against Harvey Weinstein shook the entertainment industry to its core more than four months ago.
Under the proposed deal, Weinstein Co. was to be renamed under a new board of directors, the majority of which would be composed of women. The bidders had promised to raise at least $40 million for a fund to compensate Weinstein's accusers.
But the discussions came to a sudden halt Feb. 11 when the New York attorney general's office filed a civil rights lawsuit against Weinstein Co. and its co-founders. The following day, Atty. Gen. Eric Schneiderman blasted the proposed sale and questioned the existence of the promised victims fund based on documents he'd reviewed.
Schneiderman also sharply criticized Weinstein Co. Chief Operating Officer David Glasser, whom he accused of not adequately responding to women's complaints about Weinstein. Glasser had been positioning himself to become chief executive of the new company.
The board, which includes Harvey Weinstein's brother, Bob, fired Glasser "for cause" Feb. 16 in an effort to salvage the deal talks. Glasser last week threatened to sue for wrongful termination.
On Wednesday, Contreras-Sweet and Burkle met with Schneiderman in Manhattan to discuss a compromise that would allow deal talks to progress.
But those efforts now appear to have been in vain, and the company was left with no choice but to pursue a bankruptcy filing. In a letter to Burkle and Contreras-Sweet, the Weinstein Co. board accused the bidders of failing to produce a deal that would keep the company out of bankruptcy with rescue financing and satisfy the concerns of the New York attorney general.
"We have believed in this company and in the goals set forth by the Attorney General. Based on the events of the past week, however, we must conclude that your plan to buy this company was illusory and would only leave this company hobbling toward its demise to the detriment of all constituents," the board said in its letter.
Representatives for Burkle and Contreras-Sweet declined to comment.
Weinstein Co. has been searching for a financial savior since its former co-chairman was accused of sexual harassment and assault against dozens of women. Weinstein, who was fired from the company Oct. 8, has denied all allegations of nonconsensual sex.
The Weinstein scandal triggered the #MeToo movement against sexual harassment that spanned industries and political spheres, but especially in entertainment, where high-profile men including TV broadcasters Matt Lauer and Charlie Rose and former Amazon Studios head Roy Price were ousted from their jobs because of sexual misconduct allegations.
The allegations against Weinstein turned an already precarious financial situation for Weinstein Co. — which had struggled for years under a heavy debt burden, mismanagement and a lack of hit films — into a desperate one.
Weinstein Co. tried and failed to secure financial lifelines from investors such as Thomas Barrack's Colony Capital.
A number of partners including Amazon Studios cut ties with the studio, adding to the financial pressure.
Weinstein and his studio have been hit with a barrage of lawsuits, some of which accused the company of negligence for failing to stop the mogul's conduct. Weinstein Co. recently asked a judge to dismiss a federal class-action lawsuit against the company filed in December that described a massive scheme that the plaintiffs' lawyers say facilitated predatory behavior by Weinstein.
Weinstein Co. said Weinstein acted alone in his alleged abuses and that most of the incidents occurred more than a decade ago.
Contreras-Sweet's offer for the company, which first came to light in November, represented a surprise chance for survival for the studio and the roughly 130 employees who are believed to remain.
The sale process was being handled by Moelis & Co.
Bids came due in late December. Santa Monica studio Lionsgate, known for "La La Land" and "The Hunger Games," was interested in buying certain assets of the company. Killer Content, the New York production company behind "Carol" and "Still Alice," had offered to buy the assets and remake them into an entity to support women. Other bidders included Miramax (owned by BeIN Media) and private equity firms Shamrock Capital Advisors and Vine Alternative Investments.
Most of the competing bids would have required a sale through a Chapter 11 bankruptcy process. Bidders including Killer Content expressed frustration with the way the deal making was being handled, as it became clear that the Weinstein Co. management wanted to do a deal with Contreras-Sweet.
Contreras-Sweet's emergence as a potential savior for Weinstein Co. took Hollywood by surprise. Though she has had a long career in politics and the private sector, Contreras-Sweet lacked experience in the entertainment industry. Some industry observers wondered why the board did not select a female executive with Hollywood credentials such as former Sony Pictures co-Chairman Amy Pascal or the female leadership of Killer Content, which had partnered with philanthropist Abigail Disney in its bid.
Another element that raised eyebrows was the involvement of Burkle, the supermarket billionaire who has had close ties to the Weinsteins. He has invested in movies with the brothers and in 2010 backed a failed effort for them to buy their previous studio Miramax from Walt Disney Co.
Weinstein Co. released Oscar winners including "The King's Speech" and "The Artist," but failed to reliably churn out profitable hits. Recent duds including "Gold," "Burnt" and "Tulip Fever" worsened Weinstein's standing in Hollywood.
On Oct. 5, the New York Times first reported that Harvey Weinstein had paid off women who had accused him of sexual harassment over a period spanning nearly three decades. Then the New Yorker published an Oct. 10 story by Ronan Farrow saying Weinstein had sexually assaulted women.
9:45 p.m.: This article was updated with additional comments from Weinstein Co.'s board.