Harvey Weinstein’s film and TV production company is to file for bankruptcy after the sexual harassment scandal that has engulfed the beleaguered firm sank a last-ditch $500m deal to save the business.
The company’s board said it would have to file for bankruptcy protection following the collapse of revived talks to sell to an investor group led by Maria Contreras-Sweet, a former official in Barack Obama’s administration. It branded the takeover proposal as “illusory”.
“While we recognize that this is an extremely unfortunate outcome for our employees, our creditors and any victims, the board has no choice but to pursue the only viable option to maximize the company’s remaining value: an orderly bankruptcy process,” the board said in a statement.
The Weinstein Company has been seeking a buyer for the business, which has backed films including The King’s Speech, The Artist and Quentin Tarantino’s Django Unchained, since a wave of sexual harassment and assault allegations against co-founder Harvey Weinstein emerged last year.
Since then the company, which Weinstein valued at up to $800m two years ago, has been involved in fire sale talks to secure a financial lifeline to salvage the business.
Under the proposed $500m deal, which would have given Contreras-Sweet’s consortium 51% control, the Weinstein Company was to be renamed with a new board of directors.
The majority of the new-look board were to have been women, in recognition of the Weinstein scandal that has triggered the #MeToo movement, and a $40m-plus fund to compensate Weinstein’s accusers.
“Based on the events of the past week, we must conclude that your plan to buy this company was illusory and would only leave this company hobbling toward its demise to the detriment of all constituents,” the board said in a letter to Contreras-Sweet and Ron Burkle, the US billionaire backing her bid.
Burkle, a friend of the Weinstein brothers who has invested in some of their films, backed their failed bid in 2010 to buy back their original production company, Miramax, producer of hits including Pulp Fiction, No Country for Old Men and The English Patient. The Weinsteins sold Miramax to Disney in 1993.
Talks with Contreras-Sweet’s consortium had ground to a halt earlier in February after the New York attorney general’s officer filed a civil rights suit against the Weinstein Company and its co-founders, Harvey and Bob Weinstein.
The following day the New York attorney general, Eric Schneidermann, criticized the proposed sale and David Glasser, the production company’s chief operating officer whose close ties with the Weinsteins have seen him called the “third brother”, who was subsequently sacked by the board.
“We and our advisers have worked tirelessly to finalize an agreement to present to the attorney general for his approval,” the board said in its letter to Contreras-Sweet and Burkle. “While acceding to virtually every demand you imposed … we waited patiently for you to deliver the terms you represented would save this company from certain bankruptcy. The draft you returned presents no viable option for a sale.”
As part of the talks, the Weinstein Company also urgently needed to secure interim funding while the details were hammered out to remain operational and pay its 130 remaining staff.
“We made clear that the one thing the company needed in furtherance of your good faith was interim funding to run our business and maintain our employees – employees who have remained dedicated to the company even amidst great uncertainty,” the letter said. “There is no provision for necessary interim funding to ensure your future employees were paid; instead, you increased the liabilities left behind for the company, charting a financial path that will fail.”
Late last year the Weinstein Company sold off the US distribution rights to Paddington 2, the film with the biggest potential earnings due for launch at the time of the scandal, to give it the funds to keep operating while a buyer was sought. The film, starring Hugh Grant and the Downton Abbey actor Hugh Bonneville, made $40m in the US and over $200m globally.
Just three years ago the company was flying high as suitors including ITV looked at paying almost $1bn for its TV division, which makes shows including the immensely profitable reality show Project Runway, Netflix’s Marco Polo and the BBC’s War & Peace.
Since the scandal the company has become a Hollywood pariah with major commissions from companies including Apple having been pulled.
Weinstein-backed films including Robert De Niro’s War With Grandpa and Mary Magdalene, starring Rooney Mara, Joaquin Phoenix and Chiwetel Ejiofor, have been pulled from release last year.
The Weinstein Company has already tried and failed to secure a deal with Colony Capital, a previous owner of Miramax, which it bought from Disney for $660m in 2010 and sold to the Qatari broadcaster beIN Media last year.
In December the advisory firm Moelis & Company drew interest from potential bidders including Lionsgate, known for La La Land and The Hunger Games franchise, Miramax and a number of private equity firms. However, most of these bids would have required making a deal through a chapter 11 bankruptcy process.
Once it enters into bankruptcy, prospective buyers are protected from inheriting the Weinstein Company’s legal liabilities.
The Weinsteins have put out more than 90 films since 2010 with the top five grossing more than $1.5bn internationally, according to Box Office Mojo.