Lear, Perenchio Sell Embassy Properties : Coca-Cola Pays $485 Million for Movie and TV Holdings, Including Tandem Productions
Coca-Cola Co., which already owns Columbia Pictures Industries, said it signed definitive agreements Monday to buy a host of major television properties and a fledgling movie business privately owned by Norman Lear and A. Jerrold Perenchio for $485 million in cash and stock.
Although reports of Coca-Cola’s impending purchase of Lear and Perenchio’s Los Angeles-based Embassy Communications have circulated in the entertainment industry for several weeks, the deal turned out to be larger than expected because it includes Tandem Productions, a highly successful TV production company with a stable of Lear-produced hit series.
Embassy properties being purchased include such current TV network series as “The Facts of Life,” “Silver Spoons” and “Who’s the Boss,” as well as “227,” a new series ordered for the fall season, and “Kane & Abel,” a miniseries.
The deal also includes syndication rights to such past series as “The Jeffersons,” “One Day at a Time” and “Mary Hartman, Mary Hartman.”
Two Movies Due
Tandem properties include current network series “Diff’rent Strokes” and rerun rights to “All in the Family,” “Sanford & Son,” “Maude” and “Good Times.”
Embassy’s Embassy Pictures unit is preparing to distribute shortly a theatrical film, “The Emerald Forest,” and is producing another film with Polygram from the stage hit “A Chorus Line.”
The deal, expected to close within 60 days, marks the breakup of a long business association between Lear and Perenchio.
Through a spokeswoman, Lear said: “It was the right people with the right offer at the right time in my life. I am eager to get back to the basics--to write and direct again--so I welcome the curtain going up on Act 3. Act 2 was terrific.”
Perenchio has been heading a separate group negotiating to buy a major movie theater chain from Loews Corp.
Francis T. Vincent Jr., president of Coca-Cola’s entertainment business sector, said in a telephone interview from his New York office that Lear and Perenchio will no longer be connected with Tandem and Columbia. However, he said that “we expect that the managements of those businesses will continue to run them.”
40% Cash, Rest Stock
But, in response to a question, he said Embassy Chairman Alan Horn will not remain. Horn, who has run the company and its predecessor, T.A.T. Communications, for Lear and Perenchio, could not be reached for comment Monday.
There has been some industry speculation that Horn might be slated to fill the presidency of Columbia’s movie division, Columbia Pictures, following the recent promotion of Guy McElwaine to chairman and chief executive.
The announcement said the $485-million deal is to be about 40% cash and the rest in Coca-Cola common stock. On the New York Stock Exchange, Coca-Cola shares closed Monday at $68.875, off 12.5 cents from Friday.
Specifically, the announcement said Tandem was being bought for stock and Embassy for cash. It said the stated price was “less debt,” which was not spelled out. However, it is believed to be less than $100 million.
Coca-Cola also said that, after “certain restructuring activities,” its net investment would be reduced to about $130 million. The company added in explanation that it anticipated selling a large portion of Embassy and Tandem receivables, or amounts due the companies.
It was less than two weeks ago that Coca-Cola disclosed plans to raise $750 million cash by selling some financial assets from its entertainment businesses so it could reinvest in higher return areas within Columbia Pictures and other units.
Coca-Cola’s announcement Monday said that no programming rights would be sold. It also said that it expects to sell all or a substantial part of Embassy’s home video operations after the transaction is completed.
“Embassy Television would continue to operate as a separate production company with particular emphasis in half-hour comedy series,” Coca-Cola said.
Vincent, asked about the origin of the deal, said: “Perenchio approached us and asked if we’d be interested in discussing the possible acquisition, and we said we would.” He said the first discussions took place in March but “it wasn’t a deal until today.”
In response to a question, Vincent said Coca-Cola would make a required filing under the Hart-Scott-Rodino law, notifying federal antitrust officials of the proposed merger.
Asked the main attraction in the deal for Coca-Cola, which entered the entertainment field with the January, 1982, purchase of Columbia, Vincent said:
“The properties are at the heart of the deal. We are buying a magnificent library of programming and attractive ongoing businesses.”
An executive at a rival studio did not express surprise at the price tag, saying he and other colleagues had expected a price ranging between $480 million and $500 million.
Embassy currently has more than 1,000 half-hour TV episodes licensed in syndication to stations throughout the country.
One source familiar with the acquisition said Coca-Cola is interested in continuing Embassy movie production as a joint venture with another company but has not held discussions yet with prospective partners. The source noted that Coca-Cola has a similar arrangement at Tri-Star Pictures, where it is one of three controlling shareholders, along with CBS and Time Inc.
The same source said Coca-Cola has not yet determined its final plans for Embassy’s home video business, which is believed to command about 5% to 6% of the burgeoning industry. Coca-Cola’s Columbia subsidiary operates its home video business in a joint venture with RCA under an agreement that bars either partner from owning more than 49% of any other home video company, the source said.
Paid $25 Million
Vincent noted that the Coca-Cola purchase did not include Embassy Film Associates, which earlier raised about $100 million in a limited partnership private placement for Embassy’s film production.
Perenchio and Lear reportedly paid just $25 million four years ago to acquire Avco Embassy Pictures, which was then put into Embassy Communications along with Lear-produced TV properties owned by T.A.T. Communications.
For Perenchio, at least, it was the fulfillment of a decade-old desire to own a motion picture studio, one former associate said at the time.
Embassy’s performance in the film business never equalled its success in television. The company was plagued by infrequent and often costly film production and failed to maintain its once-respected distribution system.
Perenchio “didn’t become a movie mogul,” one rival studio executive said Monday, but he noted that Embassy’s latest purchase price should silence the critics of the Perenchio-Lear partnership.
Former associates have often portrayed Perenchio as a far better deal maker than day-to-day operating executive. They recall his role in staging the 1971 “Fight of Champions” boxing match between Muhammad Ali and Joe Frazier and the 1973 “Battle of the Sexes” tennis match between Billie Jean King and Bobby Riggs.
In 1981, just prior to his purchase of Embassy, Perenchio sold his 49% interest in ON TV, a Los Angeles pay-television service, for $55 million, at the peak of the over-the-air pay-TV service. That business has since deteriorated badly with the onset of metropolitan cable-TV operations.
In June, 1983, according to their spokeswoman, Lear and Perenchio bought out a Tandem interest held by Bud Yorkin, who was Lear’s former partner.
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