Lorimar May Sell 50% of Metrocolor Unit to Disney

Lorimar Telepictures, the loss-plagued entertainment company, is preparing to sell a 50% stake in its Metrocolor Film Laboratory to Walt Disney Co., four industry sources said Monday. The price could not be learned, but one knowledgeable source said Disney may pay less than $10 million. The sale is not expected to significantly alter the financial outlook for Culver City-based Lorimar, which owed its banks nearly $165 million as of Sept. 30.

Michael Garin, a member of Lorimar’s office of the president, did not return a reporter’s call, and efforts to reach other top Lorimar executives were unsuccessful.

Disney spokesman Thomas J. Deegan declined to comment, but the Burbank entertainment conglomerate is widely expected to move its film-processing business to Metrocolor from Deluxe Laboratories, which is owned by 20th Century Fox Film Corp.

Fourteen months ago, Lorimar had a deal to sell the entire lab operation to a Technicolor affiliate for $60 million in cash and the assumption of certain obligations. The sale was blocked by an antitrust lawsuit filed by the Justice Department.

“Whatever (the price) was a year ago, it should be taken down 15% or 20% because of the market crash,” said Lisbeth R. Barron, a securities analyst with Balis Zorn Gerard in New York. She noted that since the crash, buyers have reduced the multiple on operating earnings or cash flow that they are willing to pay.

When the Justice Department sued to halt last year’s sale, government lawyers said Metrocolor controlled about 20% of the worldwide 35-millimeter, wide-release print market in 1985, while Technicolor controlled about 34% of an industry that generated about $100 million in sales.

Despite the cancellation of the Technicolor deal, Lorimar collected the $60-million cash purchase price from Technicolor’s parent, McAndrews & Forbes, under the terms of the original agreement. That deal also required Lorimar to repay up to $60 million if Metrocolor were sold for that sum.

It was unclear Monday whether McAndrews & Forbes would benefit financially from the Disney investment. Larry Rand, a Kekst & Co. public relations consultant retained by the New York firm, did not return a reporter’s call.

According to Lorimar’s most recent annual report, Lorimar agreed on May 20 to return $21.7 million of the original $60 million to McAndrews & Forbes and retain full ownership of the lab, although McAndrews & Forbes retained its deferred obligations.