Polygram Talking With Troubled Orion : Entertainment: The British conglomerate is among several companies looking at acquiring the Hollywood studio.

Polygram, the London-based entertainment conglomerate that has aggressively expanded its Hollywood film operations in recent months, has entered into “very serious” discussions with troubled Orion Pictures Corp. about a possible business deal, sources close to the talks said Thursday.

The discussions--involving John W. Kluge, the billionaire majority shareholder in Orion, which filed for Chapter 11 bankruptcy protection Wednesday--are expected to last one to two weeks, sources said. The companies declined comment.

Polygram last week announced the formation of Polygram Filmed Entertainment to oversee its growing activity at four production companies: A&M;, Working Title, Propaganda and Palace Films. Polygram also announced recently that it had earmarked $200 million for filmmaking over the next three years.

In any deal with Orion, Polygram would probably gain the studio’s film distribution system and library, which includes Academy Award winners “Dances With Wolves” and “Platoon.”

Steven Hill, an entertainment industry analyst with Sutro & Co. in San Francisco, said such a transaction would virtually overnight make Polygram a significant player in Hollywood.

“I think they are willing to pay up to get a distribution system,” Hill said.

Polygram is not the only company interested in Orion.

At least one offer has already been received and rejected. According to knowledgeable sources, an unsolicited $318-million bid for Orion was made Monday, but the New York-based company rebuffed it because it lacked sufficient cash and financing.

In addition, rumors have circulated for months that Viacom and King World have eyed the studio. Analysts doubt that those companies, with heavy interests in TV, would want to expand into the risky film business, however.

Orion’s Chapter 11 filing followed the collapse of negotiations with its bondholders. The studio’s mounting financial problems have been followed with grim fascination for months in a film community that has seen several independent production companies fold.

Some Hollywood sources predicted Thursday that Kluge, chairman of Metromedia Co., will try to take Orion private once it’s been reorganized. But most saw a merger or outright acquisition as a more likely scenario--including Wilbur Ross of Rothschild Inc., who represents bondholder interests.

“We have had quite a number of calls late yesterday and even today from parties expressing interest in a merger-and-acquisition solution to the problem,” Ross said. “And these are people who can write checks.”

An equity infusion from Polygram, or an outright sale, could prevent Orion from becoming Hollywood’s latest business casualty. Polygram did not respond to calls seeking comment.

Agents and attorneys who have dealt with the studio over the years said liquidation is almost inevitable unless Orion finds a white knight.

“This is a very sad day,” said entertainment attorney David Colden. “The sense is that the parts of Orion probably will be sold off, and that will be the end. Realistically, major talent would not be willing to be engaged by them while the company is in reorganization.”

Added Jim Wiatt, president of International Creative Management, one of Hollywood’s leading talent agencies: “This is the worst-case scenario that no one wanted to think about. It’s very difficult in this climate to recommend a client bring pet projects to Orion.”

Orion’s bankruptcy court filing indicates that the company is already behind on payments to major talent and producers.

Kevin Costner’s TIG Productions and TIG Films are owed $3 million collectively, the filing states. Another $3.2 million is owed to Merchant Ivory Productions, $800,000 to Interscope Films, $364,000 to director Jonathan Demme and $454,000 to actor Alec Baldwin.

Barring a takeover, however, company sources said Orion can make a compelling case in New York bankruptcy court that existing cash flow would be best used in releasing its 12 completed films.

In its court filing, the company reported that it has only $11.1 million on hand. But sources close to Orion said millions of dollars more will come in throughout the year. “To say the company has only $11 million in cash to market and distribute 12 movies is ridiculous,” a company spokesman said. “There’s a constant in-flow of cash.”

Not surprisingly, people involved with the 12 films in Orion’s closet are optimistic about their chances of release. They include Woody Allen’s “Shadows and Fog” and Arthur Hiller’s “Married to It.”

“They are still talking about releasing it in February,” said “Shadow and Fog” executive producer Charles H. Joffe. “Whether that happens remains to be seen. They need advertising money.”

Of “Married to It,” director Hiller said: “I’ve just heard that they are planning to release it. They’ve called and said their intention is to go ahead . . . hopefully in the spring. They have more problems over there at Orion than worrying about releasing any one film.”

Orion’s bankruptcy court filing came after the collapse of talks with bondholders over a $285-million restructuring plan. The company has fallen behind on debt payments. In its Chapter 11 petition, Orion reported assets of $1.048 billion and liabilities of $973 million.

Times staff writer John Lippman contributed to this story.