Imagine Films Stock Declines on Founders’ Threat to Leave

In the midst of a broad market rally Monday, Imagine Films Entertainment Inc. stock fell 75 cents a share to a 1991 low of $9 on news of lower earnings and the revelation that founders Ron Howard and Brian Grazer may leave the company or take it private.

Imagine--the company behind “Backdraft,” “Parenthood” and “Kindergarten Cop”--said Howard and Grazer have “significant reservations” about renewing their employment contracts when they expire next November.

The announcement came in a fourth-quarter Securities and Exchange Commission filing which also showed that Imagine’s net revenue dropped 47% for the fiscal year ended Sept. 30--to $30.1 million from $57.2 million. Net income was down 19% to $2.9 million, versus $3.7 million a year earlier.

Imagine declined comment. But some saw the announcement as a negotiating ploy, since Howard and Grazer are in the midst of difficult contract talks with Universal Pictures, the MCA Inc. unit that pays Imagine a fee plus a percentage of revenue for the films it produces.

Universal, which has distributed most of Los Angeles-based Imagine’s movies since 1986, owns the equivalent of 24% of Imagine’s stock. Howard--the former child actor who has become one of Hollywood’s most successful directors--and Grazer, a producer, each hold a 27% share.

Some have speculated that Howard and Grazer want Universal to buy out their stakes.

Jeffrey Logsdon, an entertainment analyst with Seidler Amdec Securities in Los Angeles, estimated that 22% to 29% of Universal’s box-office revenues have been generated by Imagine over the past three years.

Universal and Imagine have “Far and Away,” starring Tom Cruise and directed by Howard, scheduled for release next year.