Lorimar Telepictures, beset by losses and a cash crunch as its pending sale to Warner Communications continues to be delayed, agreed Monday to knock about $75 million off the price of the acquisition.
Under an agreement in principle, Warner will swap less of its stock to acquire Lorimar’s 46 million shares than the parties originally agreed upon last May. Instead of about $700 million, the price tag would be about $625 million, plus the assumption of about $530 million in Lorimar debt.
Warner also will provide “substantial” interim financing for operations at Culver City-based Lorimar, which previously had received $60 million in loans from Warner.
Under the revised agreement, Warner will swap 0.3675 of a share rather than 0.415 for each Lorimar share. Based on Monday’s closing price for Warner shares, Lorimar stockholders would receive $13.64 in Warner stock for each Lorimar share instead of $15.41 under the previous formula. Warner shares closed Monday at $37.125, up 37.5 cents, in composite trading on the New York Stock Exchange.
In its announcement, Warner also said the revised merger agreement will tighten up on conditions that could abort the deal. That includes eliminating Lorimar’s option to back out of the deal if it were valued at less than $15 per Lorimar share, sources at both companies said.
A Warner spokesman said the “substantial amounts” to be advanced to Lorimar are in addition to $60 million in secured loans that Warner made to Lorimar several months ago. A Lorimar spokesman said the company ran short of cash because it expected an earlier completion of the merger and had not gone to its banks for new financing.
“Basically, they are taking (the new advances) off the price,” observed Lisbeth Barron, vice president of research and corporate finance at McKinley Allsopp Securities in New York.
In addition to Lorimar’s continuing losses, she noted that Warner faced a reduction in value of Lorimar’s television stations as the result of a court battle that has stalled completion of the merger.
Warner’s biggest shareholder, Chris-Craft Industries, was granted a court injunction last month halting the merger until Lorimar’s three remaining stations are sold. A hearing on Warner’s appeal is set for Nov. 21 in the New York Court of Appeals.
Analysts say Warner has alternatives that could pave the way for proceeding with the Lorimar merger. Warner presently is seeking to put the stations in a trust pending their sale, a move conditionally approved last Friday by the Federal Communications Commission.
Although it had opposed the trust, Chris-Craft indicated that it would be satisfied with the FCC’s conditions on it.
When the Lorimar-Warner merger was announced last May 10, the value of the deal for Lorimar shareholders came out to be $13.70, based on Warner’s market price of $32.875. The stock swap value for Lorimar shareholders later increased along with Warner’s market price.