Coca-Cola and Tri-Star Pictures confirmed Tuesday that their top executives have proposed a combination of the two companies’ entertainment holdings under the leadership of Victor A. Kaufman, the current Tri-Star chairman.

Tri-Star--to be renamed Columbia Pictures Entertainment--would have assets of $3.1 billion and would catapult to the ranks of such industry leaders as MCA ($2.7 billion) and Warner Communications ($3.2 billion).

Under the proposal, Coca-Cola would exchange nearly all of its entertainment business assets--including Coca-Cola Television and Columbia Pictures--for new Tri-Star shares, boosting Coca-Cola’s stake to 80%. But Coca-Cola said it intends to reduce that stake to 49% by distributing the remainder to Coca-Cola shareholders in the form of a taxable, one-time dividend of Tri-Star stock early next year.

If the deal is consummated, the new company would continue to operate two independent movie-making units with separate distribution and marketing staffs, Kaufman said in a telephone interview. Beyond that, however, Kaufman said: “We really have not had any time to address any personnel or organizational issues.”


Executives appeared stunned at Columbia’s Burbank studio. Telephone calls were either not returned, or referred to Coca-Cola’s Atlanta headquarters.

Earlier this week, a studio source said there had been rumors that Kaufman would soon be named the top executive of Coca-Cola’s Entertainment Business Group, but no one anticipated a merger of the 63-year-old Columbia studio with Tri-Star, founded just five years ago.

“Tri-Star is the poor stepsister. Columbia is the king. And the idea of all these people reporting to Victor Kaufman--they’re all going to go crazy,” one independent producer said.

In some quarters, the proposal was viewed as an effort by Coca-Cola to distance itself from the entertainment industry that it entered in 1982 with the acquisition of Columbia Pictures and the co-founding of Tri-Star with CBS and Time Inc.


One entertainment industry executive said the reduction of Coca-Cola’s holdings to 49% in the combined company can be viewed as “a disinvestment process.” Coke executives are “putting themselves in a liquid position,” he said. “They now have an investment, as distinguished from being in the business.”

But at a news conference in New York, Coca-Cola President Donald R. Keough noted that the structure of the proposed company resembles that of its 49%-controlled bottling operations (Coca-Cola Enterprises) and the newly organized Canadian bottling company (T.C.C. Beverages Ltd.) in which Coca-Cola intends to retain 49%.

Keough, who has been tapped to become chairman of the new entertainment company while Kaufman will serve as president and chief executive, said: “Our aim is to be a major player in motion picture development and distribution. . . . We like this business.”

Under the proposed change, Columbia Pictures Chairman Francis T. Vincent Jr. will relinquish his entertainment industry duties to assume responsibility for monitoring Coca-Cola’s investments in bottling operations around the world.


Efforts to reach Vincent for comment Tuesday were unsuccessful, but he was said to be traveling to Los Angeles to meet with studio executives today.

Vincent was not involved in the weekend negotiations that resulted in the proposal because of his dual role as a Columbia executive and Tri-Star director, a Coca-Cola executive explained.

But Herbert A. Allen, Jr., the investment banker who once held a significant block of Columbia Pictures stock and now serves on Coca-Cola’s board, said Tuesday that Vincent “has talked for two years about someday combining the two entities” and must be credited as “one of the key architects of the entire transaction,” from Tri-Star’s inception to the structure now envisioned.

The investment banker declined to say what role, if any, the Allen & Co. firm played in the shaping of the proposal.


‘Excellent Deal’

On Wall Street, traders responded favorably to the announcement on a day when most stocks took a drubbing. Tri-Star Pictures rose $2.50 in over-the-counter trading to close at $13.50 as 2.6 million shares traded. Coca-Cola shares fell 12.5 cents to close at $50.50 on the New York Stock Exchange.

“I think it’s terrific,” said Gordon Crawford, a senior vice president at Los Angeles-based Capital Guardian Research Co., which has been a major Tri-Star investor. “I think it is an excellent deal for Tri-Star Pictures shareholders, because basically Victor has been a very creative, a very brilliant guy, with a lot of big ideas and visions of where he wants to go but without the capital to do it. And this transaction substantially changes the capital base of his company.”

In the past 18 months, Tri-Star has expanded from its original business of movie making to television production, distribution and movie theater ownership.


Kaufman said Tuesday that no decisions have been reached about the structure of the two companies’ television operations.

Coca-Cola Television was just formed last November to embrace new acquisitions such as Embassy Communications and Merv Griffin Enterprises, along with Columbia Pictures Television. Coca-Cola ranks as the industry’s largest distributor of off-network, or syndicated, television programming.

Kaufman said the companies do not anticipate any antitrust challenges as a result of Tri-Star’s ownership of movie theaters. Columbia sold its Walter Reade Organization theater chain earlier this year.

But one entertainment lawyer predicted privately that the combined company will have “new leverage” with theaters in general, if it supplies 30 to 40 motion pictures each year.


Hollywood and Wall Street executives typically voiced just one reservation. “Off the record, they have to make hit movies, just like everybody else in the business,” one analyst said. “But the structure looks good, I think.”

Tri-Star captured just 7% of the box office rentals last year while Columbia garnered 9%, according to figures compiled by Daily Variety analyst A. D. Murphy. Together, the 16% share still trailed industry leader Paramount Pictures, with 22%.

Times Staff Writer Debra Whitefield in New York contributed to this story.

Columbia Pictures: (wholly owned, acquired 1982 Recent feature films include “Ishtar,” “The Karate Kid II,” “Stand By Me” Owns 50% of RCA/Columbia Home Video Other interests 12% of We intraub Entertainment Group 10% of De Laurentiis Entertainment Group Has a $69-million movie production deal with Nelson Entertainment Coca Cola Television (wholly owned, formed 1986) Current series on network or in syndication include “Who’s the Boss?” “Facts of Life” and “Designing Women” Acquired Merv Griffin Productions, producer of “Wheel of Fortune” and “Jeopardy,” in 1986 Owns Embassy Communications and Columbia Pictures Television Tri-Star Pictures (owns 36%, formed 1982) Recent feature films include “Peggy Sue Got Married,” Nothing in Common” Acquired Lowes Theatres chain, 1986