Warner Completes Merger With Lorimar Telepictures
It was, as they say, the end of an era. Lorimar Telepictures Corp. at last was merged Wednesday into the entertainment mammoth Warner Communications Inc.
Lorimar, which made its reputation producing “Dallas” and other television series, will survive as a Culver City subsidiary doing what it has always done best: TV.
What it has done with notable lack of success--making movies, especially--has been wound down during the many months that the merger has been impending.
The final impediment to the merger was eliminated Tuesday with the closing of the sale of Lorimar’s last television station, WPGH in Pittsburgh. The sale of Lorimar’s stations had been forced by the terms of a previous agreement between Warner and its largest shareholder, Chris-Craft Industries.
Red Ink From Movie Losses
Many Lorimar employees whose functions became redundant under the merger have long since departed or given notice, and the distribution arms of both companies have been merged, Warner spokesman Geoffrey Holmes noted. In coming months, corporate staffs will be consolidated, but he did not estimate how many more layoffs would result.
Merv Adelson, chairman, chief executive and a founder of Lorimar, is expected to be elected a Warner director and vice chairman at the New York company’s next board meeting.
Part of Lorimar’s legacy will be the copious red ink from movie losses, with a cumulative writedown of about $254 million on the value of film inventories, according to a regulatory filing by the firm.
Although Warner is known for being one of the industry’s most conservative companies in movie accounting, the magnitude of the inventory reductions has startled some observers.
Because of the massive writedowns, securities analyst Lisbeth Barron of McKinley Allsopp Securities in New York said, a major financial effect of the merger will be a near-term reduction of the combined company’s operating income from filmed entertainment.
However, she said, the writedowns will enable future income from ancillary markets for both movies and TV series to go “directly to the bottom line.” As a result, Barron expects Lorimar to stop diluting Warner’s earnings after this year and to contribute “substantially” to its 1990 earnings.
Ancillary markets for films include foreign theatrical, home video, basic and pay cable, and local and network TV. Those for TV series include rerun syndication on local stations and basic cable networks.
Under the merger, each Lorimar share is to be swapped for 0.3675 share of Warner--a $13.64 value, based on Warner’s closing price Tuesday of $37.125. Lorimar’s last trade that day was $13.375.