The directors of Turner Broadcasting System on Tuesday approved the purchases of New Line Cinema and Castle Rock Entertainment, establishing cable mogul Ted Turner as a major force in Hollywood.
Turner Broadcasting will swap more than $500 million in stock and assume $50 million in debt for New Line, one of the most successful independent production and distribution companies. It will pay about $100 million cash and assume another $100 million in debt for Castle Rock, which has produced such hits as “In the Line of Fire” and “A Few Good Men.”
The deal caps a long-running effort by company Chairman Turner to enlarge his entertainment empire. The Atlanta-based entrepreneur sees expanding opportunities in film and TV production, thanks to technological advances that will broaden the television spectrum. Turner also foresees growth of the foreign theatrical market. One direct benefit will be sorely needed programming for his TNT and TBS cable television networks.
Michael Wolf, a Turner consultant who heads the media and entertainment practice for Booz Allen & Hamilton, said Turner will seek ways to reshape the film business.
“Turner has already redefined the other businesses he’s been in--news and cable,” Wolf said. “The opportunity for Ted here is to change the rules of the game in the movie business. Right now it’s not that exciting from a financial point of view. But it holds the promise of creating a lot of value for Ted’s shareholders, if Ted can change the rules of the game.”
The 14-member Turner Broadcasting board--including representatives from Turner’s biggest shareholders, Tele-Communications Inc. and Time Warner Inc.--OKd the deals at a meeting in New York. Sources said the pact guarantees creative autonomy for New Line and Castle Rock. Scott Sassa, head of the Turner Entertainment unit of Turner Broadcasting, will oversee the companies.
Turner set a February deadline for completing the acquisition of New Line, a publicly traded company. The Castle Rock purchase is expected to be finalized before the end of the year.
New Line was one of the big gainers on the American Stock Exchange on Tuesday, rising $1.63 a share to close at $18.88, before the deal was announced. Turner Class B stock rose 62.5 cents a share, closing at $24.13. New Line shares will be swapped approximately one for one for Turner shares.
Turner and New Line executives praised the strategic value of the deal in a formal statement.
Yet many observers consider the biggest winner to be Sony Pictures Entertainment, which owns 44% of Castle Rock, because Sony retains the right to domestically distribute Castle Rock films through 1997 and the perpetual syndication rights to the hit TV series “Seinfeld.”
Turner will also finance all Castle Rock production.
“Our strategy has always been to have pictures from (Castle Rock) coming into the system on a fully financed basis,” said Alan Levine, president of Sony Pictures’ film entertainment. “I view both Castle Rock and us as winners.”
Castle Rock Chairman Alan Horn said Turner will allow the company to continue to make “the kinds of pictures Castle Rock has become known for in this community.” The five partners of the company signed seven-year management contracts with Turner as part of the deal.
Castle Rock expects to increase its current output of between five and six films a year to as many as 12 a year under Turner.