Weinstein Co. Sale Deal Collapses

While the investors group headed by Maria Contreras-Sweet has called off the deal after studying the liabilities on TWC's books, the TWC board prepares for bankruptcy.

The on-again, off-again, on-again attempts by an investor group led by Maria Contreras-Sweet and Ron Burkle to buy the troubled Weinstein Co. is, suddenly, off again, and this time it appears it may have definitely collapsed.

A sale agreement for a $500 million deal had been reached March 1 after a marathon negotiating session that also involved New York Attorney General Eric Schneiderman.

But on Tuesday, Contreras-Sweet issued a surprise announcement that she and her group "have decided to terminate the transaction." Under the terms of the deal, the buyers had agreed to assume roughly $225 million of debt. But after signing last week's agreement and gaining access to TWC's books, they discovered an additional $50 million-$64 million in liabilities they had not been told of. One source suggests that could include $27 million in residuals and profit participation, $20 million in accounts payable and $17 million in a commercial arbitration award.

Contreras-Sweet said, "After signing and entering into the confirmatory diligence phase, we have received disappointing information about the viability of completing this transaction."

In response, TWC board issued a strongly worded statement saying it was "disappointed" that the "investor group led by Maria Contreras-Sweet and Ron Burkle has (again) walked away from its bid to buy the assets of The Weinstein Company. Although we publicly predicted this outcome, the board entered last week's agreement in the hope and good faith that a transaction would save this company and its employees."

The board countered that "the investors' excuse that they learned new information about the company's financial condition is just that — an excuse. The company has been transparent about its dire financial condition to the point of announcing its own LIKELY bankruptcy last week. We regret being correct that this buyer simply had no intention of following through on its promises."

The negotiations hit an earlier impasse last month when the TWC board called off the sale discussions on Feb. 25. The following day, without entirely closing the door on efforts to buy the company, Contreras-Sweet said: "It appears the transaction has now ended." But then, with the prospect of bankruptcy looming, the parties resumed talks, leading to the agreement that was announced last week.

This time around, the deal appears to actually be dead. In her statement, Contreras-Sweet thanked Schneiderman for his efforts to help broker a deal; Burkle and his Yucaipa Cos. for their advice and support; Lantern Asset Management for committing capital to the proposed deal; Len Blavatnick, one of the current debt holders; and TWC board member Tarak Ben Ammar.

While the prospect of a TWC bankruptcy looms, the civil lawsuit that Schneiderman brought against Bob and Harvey Weinstein and the TWC board remains in place, further complicating the company's future.

“We’ll be disappointed if the parties cannot work out their differences and close the deal. Our lawsuit against the Weinstein Company, Bob Weinstein, and Harvey Weinstein remains active and our investigation is ongoing," AG spokesperson Amy Spitalnick in a statement following the collapse of the deal.

Contreras-Sweet and Burkle would still like to pursue the idea of a women-led film studio and held out the possibility that some of TWC's assets could be acquired once the expected bankruptcy proceedings take place. "I remain committed to working to advance women’s business ownership in all sectors and to inspire girls to envision their futures as leaders of important companies," Contreras-Sweet said.

The TWC board said it will continue to look for option outside of bankruptcy, but that "in the meantime, we continue to pursue an orderly bankruptcy process to maximize the company's value."

Contreras-Sweet's full statement is below.

All of us have worked in earnest on the transaction to purchase the assets of The Weinstein Company. However, after signing and entering into the confirmatory diligence phase, we have received disappointing information about the viability of completing this transaction.

As a result, we have decided to terminate this transaction.

I would like to thank the employees and the board of The Weinstein Company for pursuing this opportunity with us and Attorney General Eric Schneiderman for playing a crucial role at a critical time. I especially want to thank Ron Burkle and The Yucaipa Companies for their advice, showing faith in this deal, and taking an unusual step of subordinating many typical investor board rights to the women who would have led this company. I would like to thank Lantern Asset Management for their early capital commitment and Len Blavatnik for his willingness to look at creative options on the debt side. Lastly, I would like to thank Tarak Ben Ammar.

I believe that our vision to create a women-led film studio is still the correct course of action. To that end, we will consider acquiring assets that may become available in the event of bankruptcy proceedings, as well as other opportunities that may become available in the entertainment industry.

I remain committed to working to advance women’s business ownership in all sectors and to inspire girls to envision their futures as leaders of important companies.

The TWC board's statement is below.

We are disappointed by the announcement today that the investor group led by Maria Contreras-Sweet and Ron Burkle has (again) walked away from its bid to buy the assets of The Weinstein Company. Although we publicly predicted this outcome, the Board entered last week's agreement in the hope and good faith that a transaction would save this Company and its employees. The investors’ excuse that they learned new information about the Company’s financial condition is just that — an excuse. The Company has been transparent about its dire financial condition to the point of announcing its own LIKELY bankruptcy last week. We regret being correct that this buyer simply had no intention of following through on its promises. Nevertheless, this Board will not quit. We will continue to work tirelessly — as we have for months — to determine if there are any viable options outside of bankruptcy. In the meantime, we continue to pursue an orderly bankruptcy process to maximize the Company's value.

March 6, 5 p.m.: Updated to include statement from TWC board of directors.