Castle Rock in Talks With Ted Turner, BMG

Castle Rock Entertainment, which produced “In the Line of Fire” and is looking for fresh financing to support bigger filmmaking ambitions, has entered advanced negotiations with two possible partners: cable TV mogul Ted Turner and German-owned Bertelsmann Music Group.

Turner is said to have the leading edge in the discussions, which range from a possible $200-million production investment to an outright purchase of Castle Rock. Sources close to the talks, which were described as “interesting, promising and exciting,” expect negotiations to be resolved within the next two months.

Driving discussions is the pending expiration of a deal between Castle Rock and New Line Cinema, which provides production financing in return for foreign and video rights. Castle Rock owes New Line two more films under the agreement, sources say. Any new deal, however, requires the cooperation of Sony Pictures Entertainment, which owns 44% of Castle Rock. The company’s other equity partner, with a 14.7% stake, is Westinghouse Electric Corp.

Sony, which also distributes Castle Rock films through its Columbia Pictures division, could have to sell or reduce its stake under certain scenarios. Castle Rock has put off discussions with Sony until a firm plan is in place. However, the production company is said to be confident of reaching an accord, since its executives could otherwise leave when their employment contracts with Castle Rock expire.

Castle Rock, Turner and BMG declined comment on the talks, which were described as “intense.” Sony also withheld comment pending further developments.

Turner and BMG both have recently expressed interest in Hollywood investments. With most of its U.S. assets in music and publishing--including RCA and Arista Records and Bantam, Doubleday and Dell publishing--BMG is looking to diversify. Turner, who sees film gaining value as new technologies take hold, needs approval of his majority partners, Time Warner Inc. and Tele-Communications Inc., to make such an investment. Sources close to the talks say that issue has not been resolved, and this could take Turner out of the running.

Financial analysts have a tough time putting a price tag on Castle Rock, which has 60 employees and is privately held. One of the big variables is the value of “Seinfeld,” the popular NBC sitcom produced by Castle Rock that will soon go into syndication.

Any deal would have to include the management participation of Castle Rock’s respected partners. While it is best known as the creative home of director Rob Reiner, Castle Rock is actually run by a group of five: Reiner, Alan Horn, Martin Shafer, Glenn Padnick and Andy Scheinman, who came together six years ago after working in various segments of the industry.

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The partners lately have been open about their restlessness and desire to gain more financial independence, since Castle Rock under its current structure has limited risk but also limited return. The company last year obtained a $100-million credit line from a group led by Chemical Bank, but still relies on New Line for the bulk of its production financing.

Discussions about a possible deal, which would include lucrative contracts and equity stakes for the founding partners, have been under way for about eight months, sources say. With a new financing deal, Castle Rock hopes to double its output to about 10 films a year. The company’s films include “A Few Good Men,” “City Slickers,” “When Harry Met Sally” and “Misery.”

Castle Rock has also produced box office duds such as “Mr. Saturday Night” and “Lord of the Flies,” but its track record remains among the best in the industry.

In addition to distributing Castle Rock films domestically, Columbia Pictures financed “In the Line of Fire” and “A Few Good Men” when New Line passed on the costly projects. Studio sources predicted Monday that Castle Rock will remain “within the family,” though another executive said every studio in town would make a run on its distribution business.

Relations between Castle Rock and Columbia have been strained at various points, especially when “Mr. Saturday Night” was released last year, but sources say they’ve recently improved. Executives from both companies attended the premiere of “In the Line of Fire” together late last week, then gathered at Spago in West Hollywood for a crowded post-premiere party, at which Sony Pictures Chairman Peter Guber publicly saluted the partnership.

Sony still has much coming from Castle Rock. Its upcoming films include “Josh and S.A.M.,” “Needful Things,” “North” (director Reiner’s next movie), “Malice,” “City Slickers 2,” “Little Big League” and “Rita Hayworth & Shaw Shank Redemption.”

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IQ Test: Critics may have considered “Weekend at Bernie’s II” insufferably dumb, but about 800,000 people managed to find their way into theaters, fork over the correct ticket price and seat themselves for showings over the weekend.

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