Sony to Revamp Controversial Deal With Guber : Company Town: Although the firm remains committed, the former chairman will get less financial help to develop his new multimedia operation.
Sony Pictures Entertainment confirmed Sunday it will alter the financing arrangements of its controversial deal with former Chairman Peter Guber, although the company added it has no plans to abandon the deal and remains committed to making it work.
Under the new plan, Sony and Guber will raise money from equity investors to replace some of the funds Sony had committed to Guber’s company.
Sony had reportedly agreed to commit as much as $275 million to the project through something resembling a revolving line of credit. Guber’s company, Mandalay Entertainment, plans to make films, TV shows and develop multimedia projects.
Sony’s rich deal with Guber was negotiated as he was being ousted in late 1994 just before Sony disclosed $3.2 billion in losses at its movie unit, which includes the Columbia and TriStar pictures operations. Sony has been under fire ever since for rewarding Guber--who before joining Sony in 1989 was a successful producer of such films as “Batman"--with such a rich deal in the wake of his performance running the company.
The deal has reportedly irked executives at Sony headquarters in Tokyo. Last month, they ousted Sony Corp. of America Chief Executive Michael P. Schulhof, who negotiated the deal with Guber, in part because of his lavish spending. But sources on Sunday denied that the revision in the Guber deal was done under orders from Sony President Nobuyuki Idei.
Sony could continue as an significant investor in Mandalay, sources said, and will continue to distribute the films Guber makes. Oversight of the deal is being transferred from Sony Corp. of America in New York, which Schulhof ran, to the company’s Culver City-based movie unit, which sources said was in the works before Schulhof was ousted.
Despite the expected revision in the financial terms, a Sony spokesman said the company “remains committed to honoring all of our obligations to Mandalay.”
Sony sources said it is premature to estimate how much of Guber’s company will be financed by outside investors, because that will depend on the level of investor interest. The revision of the deal assumes there will be interest by outside investors.
In any event, Guber’s deal with Sony is now expected to more closely resemble other deals the company has with such producers as Mike Medavoy and Stanley Jaffe in which much of the risk is taken by investors rather than Sony.
In a statement, Sony Pictures Entertainment President Alan J. Levine said that Guber’s Manadalay “represents a significant source of new feature film product, and we have great expectations for Manadalay’s output over the years to come.”
Guber, in a statement, said that Sony Pictures “is firmly supportive of our efforts to provide quality motion pictures” to be distributed by Sony.