France Blocks Parretti Bid for Pathe Cinema

The French government blocked an attempt by Italian investor Giancarlo Parretti to take full control of France’s Pathe Cinema, citing the bid as a threat to “public order.”

Separately, Beverly Hills-based Pathe Communications Corp., of which Parretti is president, extended its $1.2-billion tender offer for MGM/UA Communications Co. until June 22.

The extension came as Pathe and MGM/UA officers discussed the possibility of a much longer delay if Pathe fails to work out details of an agreement with Time Warner Inc., its major backer, an individual familiar with the talks said.

The tender offer, which had been extended before, was set to expire Friday. But Pathe has until June 23 to complete its offer under an agreement with MGM/UA’s majority shareholder, Kirk Kerkorian.

A Pathe spokesman said only that the offer’s closing was delayed because of the complexity of Pathe’s financial arrangements, which have not yet been completed. They involve a patchwork of short-term bank loans and advances, and $650 million from Time Warner in exchange for the right to distribute MGM, United Artists and Pathe films for 20 years.

As of late Friday, Parretti was still in talks with Time Warner executives and was separately discussing a contingency plan under which he might extend his offer for as long as three months while seeking a new backer if the negotiations with Time Warner fail, individuals close to the discussions said.

“A proposal (to extend for three months) has been made. I’m not sure if Kirk has accepted it,” one of the individuals said.

One unresolved point has been Pathe’s ability to finance new pictures once it completes the acquisition. According to a filing with the Securities and Exchange Commission earlier this week, Pathe has proposed to provide $125 million in production financing, rather than the $200 million required by its Warner agreement.

The action by France’s Finance Minister, Pierre Beregovoy, followed an intense public debate in that country over Parretti’s bid to pay about $167 million for the 52% of Pathe Cinema that it doesn’t already own.

Pathe Cinema is a major French movie and TV producer with a 400-film library and a chain of about 150 theaters.

French officials had previously raised, and then dropped, a claim that Parretti’s purchase should be blocked because much of the funding came from a company owned by Pathe Chairman Florio Fiorini. The French had initially objected because Fiorini’s company is based in Switzerland, which isn’t a member of the European Community.

In explaining the government’s latest move, a Finance Ministry spokeswoman said “rumors” about people involved with the deal were sufficiently serious to justify postponing it, according to a report by Reuters. The spokeswoman didn’t elaborate, Reuters said.

A threat to public order is one of the few grounds on which French officials are permitted to block a bid from within the EC.

A Pathe spokesman in Paris, Salvatore Picciotto, was quoted by Reuters as maintaining that “what Beregovoy has done is only postpone a decision. It is not a veto. It just means he is saying, ‘I will not give my ruling today.’ That is all.”

Pathe’s representative in Los Angeles, Craig Parsons, said he didn’t expect the European controversy to hamper Pathe’s bid for MGM/UA.