The prospect of a deal between controversial financier David Bergstein and the Walt Disney Company over Miramax has some banks raising questions about the validity of the numbers driving the negotiations.
According to a financial expert with knowledge of the talks, at least two financial institutions have balked at the notion of loaning debt to Bergstein and his three backers because of the valuation being assigned the Miramax library.
Bergstein and his backers, L.A. construction magnate Ron Tutor and two other unnamed individuals, had previously offered more than $650 million for the Miramax library, the highest bid in the process so far.
Bergstein has plenty of financial troubles of his own.
But what worries the banks is what lies in Disney’s five-year-old exit deal with Harvey and Bob Weinstein, who got divorced from the company but retained the rights to 15 Miramax franchise films (though not the name of the company).
Whoever owns the Miramax library will need the consent of the Weinstein brothers be able to make sequels or any other projects based on the original film properties Spy Kids, Scream, Scary Movie, Halloween, Pulp Fiction, Sin City and several others.
Valuation experts have placed the value of those franchises at somewhere between $150 million to $200 million. That would be close to one-third of the value of the deal Bergstein is seeking to make with Disney.
Without the active cooperation of the Weinsteins – whose attempt to buy Miramax with billionaire Ron Burkle foundered a week ago – the banks are having a hard time justifying the high valuation. (See: Miramax Deal-Killer: Burkle Cut the Offer Price)
And rightly so; the initial valuations on the Miramax library were for between $400 and $500 million, a very far cry from the $700 million Disney sought as a purchase price. (The deal includes about $200 million in accounts receivable, which also reduces the actual cash that would be paid out.)
According to the finance expert, Bergstein and his partners have brought the deal to more than a half-dozen banks to seek debt financing. At least two of those banks have balked at lending money without knowing the details of what was in the Weinsteins' exit package.
Bergstein’s offer was for all cash. But typically in such deals, the buyers seek to leverage their equity against debt, and use some combination of the two to finance the deal.
That could mean that David Bergstein’s next call could be to Harvey Weinstein, seeking an alliance that would bring the Miramax co-founder into the deal, in exchange for his agreement to collaborate on the franchises.
The Miramax sale has been dragging on for months, with much of it playing out in the media.
Disney had sought $700 million, and individuals involved in the talks said that the company had entered into exclusive negotiations with the Bergstein group after the breakdown last week of talks with Harvey Weinstein and Ron Burkle.
Read previously: Disney, Bergstein Negotiating Exclusively Over Miramax