Harvey to Get Cash Influx, Magoo Rights

Harvey Entertainment Co., which owns the rights to Casper the Friendly Ghost and other cartoon characters, will receive the rights to Mr. Magoo as part of a transaction that will inject $26 million into Harvey.

Harvey signed a letter of intent for Classic Media LLC to invest $26 million in cash in Los Angeles-based Harvey and for Classic to give Harvey all of the outstanding stock of UPA Industries Inc. UPA, owner of Mr. Magoo, is valued at $4 million. Classic Media will receive $30 million in a newly issued Harvey Entertainment preferred stock and warrants to buy common stock.

Harvey Entertainment has been seeking equity investors and also has been looking for rights to more characters, Chairman and Chief Executive Roger Burlage said in a statement. The company said it received several offers over the last four months. The investment gives Classic Media, a closely held company based in New York, control of Harvey’s board.

The letter of intent provides for a due diligence period, after which Classic Media must decide whether to complete its investment.

The preferred stock that Classic will receive will pay a 7% annual dividend in either cash or more preferred stock. The preferred stock will be convertible into common stock at $3 a share.

Classic also will get warrants to buy 10.7 million of Harvey’s common shares. Warrants for 4.2 million Harvey shares are exercisable at the lower of $3 a share or Harvey’s share price before the closing of the transaction, though not less than $2.50 per share.

Warrants for 3.27 million shares are exercisable at $4.50 each, and warrants for 3.27 million shares can be exercised at $6 each.

Harvey Entertainment shares rose 25 cents to $2.75 in Nasdaq trading. The shares have fallen 28% this year.