Coke to Combine Columbia, Tri-Star, TV Film Holdings

In a dramatic move that will create a $2-billion entertainment company, Coca-Cola is expected to announce today that it will combine all its entertainment holdings--including Columbia Pictures, Coca-Cola Television and a one-third stake in Tri-Star Pictures--in one company under Tri-Star Chairman Victor A. Kaufman.

Although Coca-Cola would initially hold 70% or more of the combined company, the Atlanta-based soft-drink company intends to reduce its stake to about 49% and distribute the remainder to Coca-Cola shareholders, two Wall Street sources said Thursday.

Sources were unwilling to predict whether both Tri-Star and Columbia would survive as separate movie-making entities, but one Wall Street executive contended that the combination would result in a stronger company with improved chances of producing hits, “which--let’s face it--they haven’t been doing for the last couple of years.”

No name has been selected for the combined companies, the sources said, but one executive said that “the Columbia name will be in there.”

The decision appears to be a triumph for Kaufman, a 44-year-old lawyer who left Columbia to run Tri-Star in 1982, when that company was founded by Coca-Cola, Time Inc. and CBS. Since 1985, when Tri-Star first offered shares to the public, it has launched an aggressive campaign to expand into television production and the operation of movie theaters. Last December, the company acquired Loews Theaters, and it announced recently that it would double that 300-screen operation within 18 months.

Smash successes at the box office have eluded Tri-Star, however, with its failure to produce a “blockbuster”--a film that earns more than $50 million in box-office rentals.

Columbia Pictures has not fared much better recently, tying Universal Pictures for fourth place among the major studios last year in box-office rentals with a 9% share. Earlier this summer, the costly flop of the Dustin Hoffman-Warren Beatty film “Ishtar” triggered an operating loss for Coca-Cola’s entertainment business sector, which includes Columbia Pictures. Coca-Cola, which bought Columbia in 1982, wrote down its investment in “Ishtar” by more than $25 million to cover expected losses.

Columbia Major Player

From inception, the dominant partner in Tri-Star has been Columbia Pictures, which reaped a 12.5% fee for distributing Tri-Star’s movies to theaters. After Tri-Star went public two years ago, CBS sold its stake and Time’s Home Box Office reduced its holdings by half. But Columbia Pictures, through its parent Coca-Cola, increased its stake as recently as last month, purchasing 3.3 million new shares of Tri-Star for $50 million.

Neither Kaufman nor Columbia Chairman Francis T. Vincent Jr., 49, could be reached for comment late Monday.

Sources said, however, that Vincent is expected to remain with Coca-Cola as an executive vice president, concentrating on the parent firm’s 49%-owned bottling operation, Coca-Cola Enterprises.

In an interview just three months ago, Kaufman said he “didn’t think” the day would come when Columbia and Tri-Star would combine either their motion picture divisions or their television holdings in a single company. “I think Tri-Star will stay as a strong, independent film company, with Coca-Cola as its largest shareholder,” Kaufman said at that time.

Just last November, Coca-Cola regrouped its three television companies--Columbia Pictures Television, Embassy Communications and Merv Griffin Enterprises--under a new umbrella organization called Coca-Cola Television. Through acquisitions of such companies as Embassy and Merv Griffin, Coca-Cola had become the industry’s largest distributor of off-network television programming.

Frank J. Biondi Jr., Coca-Cola Television’s chairman and chief executive, quit in July to become chief executive of Viacom International, a New York-based entertainment company. No successor to Biondi had been named.

In addition to Columbia, Coca-Cola’s entertainment holdings include a 12% stake in Weintraub Entertainment Group and 10% in De Laurentiis Entertainment Group. It has also agreed to spend up to $69 million producing movies with Nelson Entertainment Inc., a home video company.