Live Entertainment to Merge With Carolco

Live Entertainment Inc., a Van Nuys videocassette distributor, has agreed to merge with its former 49.9% owner, Carolco Pictures Inc., in a tax-free exchange of stock.

The deal calls for each Carolco stockholder to receive one share of newly issued Live common stock for each 5.5 Carolco shares held. The exchange ratio will depend on the market price for Carolco stock, but would go no lower than 4.5 Carolco shares and no higher than 6.5 for each share of Live. After the exchange, current Live stockholders will own between 21% and 28% of the combined company, to be called Carolco Entertainment Inc., with the remainder to be owned by current Carolco shareholders.

The transaction, which is expected to be completed by the end of the year, is subject to approval by regulators and shareholders of both companies. The deal is also contingent on Live’s buyback of its Series B preferred stock and other conditions.

Carolco, a Los Angeles movie production company whose films include “Terminator 2” and “Basic Instinct,” formerly owned slightly less than half of Live’s stock, but financial troubles at the two companies forced it to cede control to a group of foreign investors led by Pioneer LDCA of Japan. Pioneer now owns 41.2% of Carolco’s voting stock and 53.5% of Live’s voting stock.