The $500-million deal for an investor group to acquire Harvey Weinstein’s former movie and TV studio has collapsed — again — in yet another twist in the chaotic saga of Weinstein Co.

Three sources close to the investor group, led by former Obama administration official Maria Contreras-Sweet, said Tuesday that it found at least $50 million in undisclosed liabilities on the New York company’s books.

The surprise debts, which would have significantly increased the purchase price of the assets, torpedoed negotiations, said the knowledgeable people, who were not authorized to speak publicly.

“All of us have worked in earnest on the transaction to purchase the assets of the Weinstein Company,” Maria Contreras-Sweet, a former head of the Small Business Administration who was leading the investment group, said in a statement. “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.”

Weinstein Co.’s board fired back in its own statement, saying it was “transparent about its dire financial condition” and had acted in “good faith” in the hope that a deal could be reached. “We regret being correct that this buyer simply had no intention of following through on its promises,” the statement said.

The latest development increases the likelihood that Weinstein Co., founded in 2005, will file for bankruptcy protection in a matter of days as the studio runs out of cash. The scuttling of the deal casts additional uncertainty over the fate of the company’s estimated 130 employees in New York and Los Angeles.

The board said that while it explores alternatives it will “continue to pursue an orderly bankruptcy process to maximize the company’s value.”

The abandoned deal would have put a female face on a company that has been besieged by sexual harassment and assault accusations against Harvey Weinstein. The bidders had vowed to install a mainly female board of directors and rebrand the studio.

The mogul was forced out of the company he co-founded with his brother, Bob, after dozens of women accused Harvey Weinstein of sexual misconduct starting in October. He has denied all allegations of nonconsensual sex.

The implosion of the talks comes less than a week after Contreras-Sweet’s group, backed by billionaire Ron Burkle and Dallas private equity firm Lantern Capital, announced that it had reached an agreement in principle to buy Weinstein Co., subject to a 40-day closing period.

The bid was worth $500 million, consisting of the assumption of $225 million in debt and $275 million to invest in a new female-focused studio, according to people familiar with the terms.

The agreement was reached after a last-ditch meeting between the investor group and Weinstein Co.’s board of directors at the office of New York Atty. Gen. Eric Schneiderman, who had criticized the planned sale last month.

The bidders took some steps to address Schneiderman’s concerns, promising to set aside a $90-million fund to compensate Weinstein’s accusers. That fund would’ve consisted of $50 million from the sale of unreleased Weinstein Co. movies, plus money from insurance policies and a $10-million line of credit.

But a key stumbling block emerged in recent days. A source familiar with the deal said Weinstein Co.’s recently discovered undisclosed liabilities included $27 million in residuals and profit participation and $20 million in accounts payable. There was also a $17-million debt outstanding in connection with a commercial arbitration award.

Schneiderman’s office expressed disappointment at the outcome.

“We’ll be disappointed if the parties cannot work out their differences and close the deal,” Schneiderman spokeswoman Amy Spitalnick said in a statement. “Our lawsuit against the Weinstein Company, Bob Weinstein and Harvey Weinstein remains active and our investigation is ongoing.”

 (Excerpt) Read More in: Los Angeles Times

Weinstein Co. Deal Collapses in Yet Another Twist, Pushing Studio Closer to Bankruptcy

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