Lorimar Ends Merger Talks With Warner : Marvin Davis Says He Still Wants Culver City Firm

Ending five weeks of suspense, Lorimar Telepictures said Tuesday that talks were terminated with Warner Communications about a possible business combination of the two entertainment companies.

The talks had been characterized by Lorimar as “exploratory discussions,” but as previously reported, sources said Warner over the weekend made an acquisition proposal and expected a Lorimar reply Monday. The Warner bid apparently was rejected.

The deal’s collapse prompted speculation that Culver City-based Lorimar may try to remain independent, concentrating on its core business of producing and distributing television, motion picture and home video products.

But the company’s stock dropped in the wake of the news, increasing its vulnerability to an unfriendly bid. Some Wall Street and Hollywood sources speculated that Lorimar might welcome a “white knight” if a bid is made by an unwelcome suitor--in particular, dissident shareholder Marvin Davis.

Davis Factor

Davis was being portrayed as a deal “spoiler” by some sources familiar with the talks, because he publicly declared that he would be willing to pay at least $17 a share in cash if he was permitted to examine Lorimar’s books and found evidence to support his bid.

Warner’s proposal, however, was for less than $15 per share, according to industry sources. The lower bid presumably created a concern that Lorimar--or Warner, as the acquiring company--would be sued by unhappy shareholders who had read of Davis’ higher, albeit conditional bid.

Davis, who made his first fortune as a Denver oilman, has been searching for a new entertainment holding since he sold 20th Century Fox Film to media mogul Rupert Murdoch in 1985. On Tuesday, however, the 62-year-old financier gave no indication how he will proceed with a Lorimar bid. A source close to Davis said he “intends to vigorously pursue the company and is considering options that will best lead to that result.”

Communications Testy

Davis’ sincerity has been questioned by the investment community because he has bowed out after bidding for such companies as CBS, Resorts International and Spectradyne in the last two years.

Communications between Davis and Lorimar grew testy last month, with Davis’ public release of his letter to Lorimar Chairman Merv Adelson castigating Adelson for not giving other “serious bidders” access to Lorimar’s books.

One executive familiar with the Warner proposal said he questioned how Davis’ offer could be feasible if Warner--which stood to economize by merging certain operations--could not justify a $17 offer.

Analysts had expected Warner to propose a merger by exchanging its stock for Lorimar’s, and they had noted that Warner might offer lower value in stock than in a cash bid because it believes its own stock is currently undervalued.

After the deal collapsed Tuesday, Warner shares rose 87.5 cents, closing at $32.50 on the New York Stock Exchange with 498,500 shares changing hands.

Lorimar shares fell $1.50 in composite trading on the American Stock Exchange, to close at $12.625. The volume was 1.52 million shares, nearly treble the stock’s activity of the preceding day but far less than the 3.5 million shares that changed hands March 7, the day it announced talks with Warner.

Susan Binford, an outside corporate communications adviser retained by Lorimar, said the company would not divulge its immediate plans or details of the deal’s collapse. She declined to even disclose when the decision was finally reached.

Efforts to reach Warner spokesman Geoffrey W. Holmes were unsuccessful.

At least two executives well-acquainted with Lorimar predicted Tuesday that Adelson might try to restore morale and operate the company independently.

Lorimar has lost $141 million since its 1985 merger with Telepictures, a strong supplier of off-network programming, but the losses have occurred in its motion picture and home video units, and not the company’s envied television business.

Despite reports of strained relations between Adelson and Telepictures’ executives, one financial community executive noted that Lorimar has improved its financial condition through the sale of its advertising agencies and its plan to mortgage its Culver City lot for an estimated $75 million. The company is expected to have “substantial borrowing capacity at the banks,” the executive said.