Castle Rock, Orion Takeover Talks Fail

Castle Rock Entertainment’s attempt to take control of financially troubled Orion Pictures Corp. has ended after extensive discussions between the managers of the small film company and an associate of Orion’s majority owner, John Kluge.

The 2-month-old talks fell apart last week, largely because the participants could not find a way to reduce Orion’s $500-million debt load. Officers of Sony Corp.’s Columbia Pictures Entertainment--which owns 30% of Castle Rock--also balked at dismantling their current arrangement with the production company, sources familiar with the situation said.

During talks with Kluge associate Stuart Subotnick in New York, Castle Rock co-owner Alan Horn discussed a plan under which he and fellow executives would have assumed management of Orion. Simultaneously, Orion, tapping new financing, would have purchased Castle Rock or some part of it, people familiar with the situation said.

Creative Artists Agency Chairman Michael Ovitz, who represents Castle Rock, participated in the talks and apparently had found at least some funding, according to sources. But a major stumbling block was Columbia’s existing right to distribute Orion films abroad, which limits the likelihood of new foreign financing.

Two people close to Columbia said that company was not willing to let go of Castle Rock, which is co-owned by director Rob Reiner and has produced such films as “Misery” and “When Harry Met Sally” for distribution by the studio. “It’s not happening. They’re a big asset of ours,” one Columbia executive said of the deal.

Castle Rock plans to consider other deals that would allow it to broaden the scope of its movie and TV production business without jeopardizing its Columbia ties.

It is not clear whether Orion has other offers. The company has disclosed that it hired the Salomon Bros. investment banking firm to seek new funds, and Kluge has said he is considering a sale of the 70% Orion stake held by his New Jersey-based Metromedia Co.

An Orion spokesman declined to comment on the talks, and a Metromedia spokeswoman could not be reached late Tuesday. Officers at Castle Rock and Columbia declined to comment.

Orion outshone its competitors at Monday night’s Oscar ceremony by garnering eight awards, including best picture and best director for “Dances With Wolves.” But the company has suffered under a huge debt load accumulated during years when its pictures did poorly at the box office.

A Columbia executive on Tuesday speculated that Orion might receive enough revenue from “Dances” and “Silence of the Lambs” to keep operating with new investment but without an outright sale of the company.