Carolco, Live Reach Tentative Merger Accord

A preliminary agreement has been reached in a plan to merge Carolco Pictures Inc.--which produced the summer blockbuster “Terminator 2”--with Live Entertainment Inc.

The agreement, announced Tuesday, offers Live stockholders 2.5025 shares of stock in the newly formed company for each share of Live stock that they hold. Carolco stockholders would receive one share of new company stock for every Carolco share.

Paul Marsh, an analyst with Kemper Securities in Los Angeles, said the preliminary agreement may disappoint Live shareholders, since it offers $16 in stock for each share of Live, compared to the $21.50 initially proposed by Live’s independent board in June.

Some Live shareholders have already challenged the proposed merger in court on grounds that even at $21.50 the share price was too low. But analyst Jeff Logsdon of Seidler Amdec Securities in Los Angeles pointed out that an adjustment in the deal might be in order, given that Carolco’s shares have dropped 25% since the deal was first announced, while Live’s shares are up 33%.

Wall Street showed little enthusiasm Tuesday for the preliminary agreement. Live closed down 50 cents a share, to $12.625. Carolco lost 25 cents, closing at $5.875.

People close to the talks said the exact financial terms remain subject to market fluctuations. “Both sides hope to move forward from here,” one source said, adding that Live and Carolco hope to finalize the merger by early next year.

Carolco already owns 54% of Live, a Van Nuys-based home video company that distributes films by Carolco and other companies.