With the sale of Miramax Films completed, the future of the pioneering independent studio will be a test of one of Hollywood's newest sources of money: Colony Capital.
Since the 19-year-old Santa Monica investment firm joined in late June with construction magnate Ron Tutor to bid for Miramax, Colony has taken the lead in shaping the acquisition, raising money and charting a new course for the studio.
The $663-million deal's lead investor was the Qatar government's sovereign wealth fund, which was recruited by Colony founder and Chief Executive Tom Barrack. Together, the Qatar fund, Colony and Barrack himself provided the majority of $250 million in equity paid for Miramax, a division of Walt Disney Co. Most of the rest came from Tutor, who declined to comment for this article.
Though the new partners won't operate the specialty film label, Colony principal and former Disney executive Richard Nanula will be its chairman.
Overseeing Miramax and its library of more than 700 titles will be Mike Lang, a former News Corp. executive who is expected to be named chief executive soon.
Previously best known for its investments in real estate, Colony has established a new entertainment fund that was the brainchild of Barrack and his friend, actor Rob Lowe. A portion of the fund, which is not fully financed yet, was used for Colony's investment in Miramax — its first foray into the movie industry.
Colony's only other entertainment-related deals were a debt restructuring for Michael Jackson's Neverland Ranch before the celebrity's death, and the purchase of debt owed by photographer Annie Leibovitz.
It has yet to be seen whether Colony's bet that Miramax has untapped value will pay off. Several other parties — including supermarket magnate Ron Burkle on behalf of Miramax founders Bob and Harvey Weinstein — had considered acquiring Miramax but balked at the asking price. If Miramax turns out to be lucrative, that would establish Colony as a savvy investor as it seeks other opportunities in entertainment.
"Miramax is an irreplaceable and undervalued asset and brand," Barrack said in an e-mailed statement. "We see many exciting opportunities to bring the Miramax library to viewers around the world, through both traditional and new outlets, as the way people consume media continues to evolve."
As the home entertainment market shrinks, many in Hollywood have questioned the wisdom of investing in any film library. However, people close to Colony said the firm is convinced that Miramax was a largely ignored asset that will generate enough cash to repay the debt portion of the purchase within four years.
Under Lang, Miramax is expected to explore making a digital distribution deal with Google Inc.'s YouTube, building Miramax.com as a destination site to view movies online and launching a new cable channel devoted to its library, which includes titles such as "Shakespeare in Love" and "Chicago."
The new Miramax will have 60 to 80 employees and about $15 million in annual overhead spending, said people with knowledge of the plans. Executives will explore rights deals and partnerships for sequels and spin-offs based on its library.
A key figure in the Miramax negotiations was Nanula, a longtime senior executive at Disney who served as chief financial officer when the company acquired Miramax in 1993 from the Weinsteins. When his boss, Barrack, gave him a green light to pursue acquisitions in late June, Nanula suggested looking at Miramax. Barrack contacted Tutor, who was already in talks with Disney to buy Miramax after a previous deal with Burkle and the Weinstein brothers collapsed.
Colony and Tutor plan to assemble their executive team in the coming weeks. Along with Lang, who has extensive experience in digital media, they are expected to hire a senior television distribution executive to sell Miramax movies around the world.