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Milchan Leaving Warner for 20th Century Fox

COMPANY TOWN

Movies: Deal calls for News Corp. to invest $200 million in his New Regency Productions.

September 09, 1997|CLAUDIA ELLER | TIMES STAFF WRITER

Ending a six-year association with Warner Bros. Inc., movie financier and international entrepreneur Arnon Milchan will be moving his home base to 20th Century Fox after the News Corp.-owned company agreed to make what sources say is a $200-million equity investment in his New Regency Productions--the outfit behind such hits as "A Time to Kill," "Tin Cup," "The Client," "J.F.K.," and the "Under Siege" and "Free Willy" series--for a 20% stake.

The deal, which calls for Fox to distribute the company's movies over the next 15 years in all media worldwide, except international TV, makes News Corp. Chairman Rupert Murdoch an equal shareholder with New Regency's formerly largest investor, Australian media mogul Kerry Packer, who sources say has diluted his 25% stake to 20%. South Korean electronics conglomerate Samsung owns 7% of New Regency and Germany's TV Kirch Group holds 5%, leaving Milchan with 48%. Though Milchan gives up his majority stake with the Fox alliance, sources say his shareholder agreement allows him to keep operating control of the company.

In addition to the $200 million Fox will invest in New Regency, sources say, the studio has agreed to commit an additional $30 million to $50 million to other joint ventures in television and sports. Fox and New Regency plan to produce TV programming and have an arrangement for Fox Sports Net and Fox Kids Net to market and promote Puma, a German sporting goods giant.

Last November, New Regency paid more than $60 million to acquire a 12.5% stake in Puma. It is currently in discussions to acquire another 12.5%.

Sports, in fact, was one of the major components of the new alliance with Fox, which last week agreed to pay $350 million for the Los Angeles Dodgers.

"Rupert and I see that sports is part of entertainment," the 62-year-old Milchan said in an interview Monday, "that sports, movies, television and music belong under the same umbrella."

Milchan also recently entered the music arena with the purchase of Hollywood-based Restless Records, which is currently releasing the soundtrack to New Regency's upcoming fall release "L.A. Confidential."

New Regency also operates a TV company, which is currently producing the new fall CBS series "Michael Hayes," starring David Caruso.

"Publishing is another area we're highly interested in," said Milchan, adding, "Wherever Rupert is, we can connect."

At the core of the new deal, however, is movies.

The arrangement allows Fox to lay off the risk on some big-budgeted movies since New Regency fully finances much of its own product through its international partnerships. Milchan said New Regency will probably bankroll six out of nine movies a year and work with Fox on the others.

Sources said Warner was unwilling to make the huge equity infusion sought by Milchan or accept other concessions, including lower-than-standard distribution fees (less than 15%) for releasing the company's movies.

Fox, which last year hit pay dirt with the worldwide blockbuster "Independence Day," has recently been suffering at the box office with such financial losers as "Volcano" and "Speed 2: Cruise Control," which alone is expected to wind up more than $65 million in the red.

One rival studio head said Murdoch was willing to make such a large investment in New Regency because "he desperately wanted to get some outside money into his big pictures."

While New Regency is a prolific, financially successful outfit that has produced 31 films over the last five years--fully financing about half and teaming up with Warner on the remainder--it has had its share of box-office flops, including most recently "Bogus," "Sun Chasers" and "North Star."

Milchan had been in renegotiations with Warner Bros. co-heads Bob Daly and Terry Semel for the last year, but the studio chiefs passed on his proposed $200-million deal because they thought it too rich.

New Regency and Warner remain linked; the two companies co-own a movie library that includes "J.F.K.," "The Client," "A Time to Kill" and the "Free Willy" and "Under Siege" series and are still officially in business together until June 1.

"We're bound to stay best friends with Warner Bros. for life because we're partners in over $1 billion worth of assets, movies, that we co-own," says Milchan, adding, "They've been extremely gracious and supportive."

Milchan also said he hopes to continue co-financing movies with Warner that Fox will distribute. "We can now finally act as a studio."

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