MOUSE MAY SWALLOW CINERGI, MARKING END OF AN ERA (Planned acquisition of Cinergi Pictures by Walt Disney Co.)

VARIETY / Martin Peers/ March 24, 1997

Mario Kassar has become an independent producer with a deal at Paramount. Arnon Milchan may move his company, New Regency, from Warner to 20th Century Fox. And now Andy Vajna's Cinergi Pictures may be bought out by Disney.
The big wheeler-dealers of the '80s and early '90s who specialized in foreign sales and offshore financing are all making big changes in the way they do business.
Ending a yearlong search for a buyer, Vajna and Walt Disney Co. plan to wind up Cinergi Pictures Entertainment Inc. In a deal that could be announced within days, the House of Mouse will likely buy Cinergi's library while Vajna will purchase the indie's development projects. He is believed to be headed into a production deal at 20th Century Fox.
Cinergi shareholders won't fare too well, however, getting a cash offer for their stock of only a little higher than the present market price, which closed March 21 up 21 [cts.] to $1.53 (driven by Daily Variety's report of the pending deal). Cinergi itself will be liquidated subsequently.
Full details of the deal were still unclear late last week and neither Cinergi nor Disney would comment, but sources say Disney won't pay too much for the library, which includes pictures such as NIXON and the recently released EVITA.
That's because Disney already has a handle on the library: As the distributor on the pictures, it retains North and South American rights to the library "in perpetuity," SEC filings say. In addition, as part of the output deal, the Mouse House had been lending the indie production money, and $35.4 million was outstanding as of Sept. 30 (Cinergi is yet to report for the quarter to Dec. 31). Repayment of the production loans is secured by certain rights on the pictures.
And the library only has limited value--its biggest hit, DIE HARD WITH A VENGEANCE, is not included because U.S. distribution rights in all media are owned by 20th Century Fox, which jointly owns the copyright with Cinergi, according to SEC filings.
Most of its other releases, which include MEDICINE MAN, THE COLOR OF NIGHT, THE SCARLET LETTER, JUDGE DREDD and NIXON did poorly. Cinergi's best year was 1994, when it made $2.8 million. It lost $16 million in 1995 and another $1.6 million in the first nine months of 1996.

Suitors snubbed
Other potential suitors have flirted with acquiring Cinergi and were prepared to do a deal as good as shareholders are getting, some sources say. Since Cinergi put itself on the market as part of a "strategic review" last spring, Vajna and his advisers have met with everyone from Disney to Milchan's New Regency Enterprises to Mike Medavoy's Phoenix Pictures, and more recently, sources say, with Jim Robinson at Morgan Creek Prods.
But Disney, which already owned just under 5% of Cinergi, had a strong interest in doing the deal. There are still 16 pictures outstanding on the 25-picture distribution deal and sources say Disney wanted to ensure another buyer didn't end up with control of the company.
Lately, Cinergi had focused on doing smaller-budget pictures, but people close to Cinergi predicted Vajna was not going to be satisfied doing those.
"Cinergi's winding up just goes into the annals of another independent movie producer gone bad," says Dennis McAlpine, an analyst with Josephthal Lyon & Ross.

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