Cannon Group Plans Merger With European Affiliates

Cannon Group will be blended into a collection of European tourism, banking, hotel and real estate interests under a proposed reorganization unveiled Tuesday.

The conglomerate would include affiliates of Interpart S.A. of Luxembourg, which owns 40% of Cannon. Since last June, Interpart has made huge cash infusions in the battered Los Angeles movie producer and theater owner.

The new entity is to be called Cannon-Melia Group. Cannon’s longtime top officers, Chairman Menahem Golan and President Yoram Globus, are expected to continue as two of the four executives at the helm of the business, with Cannon as the “senior company,” the announcement said.

Cannon also said it expected to budget the production of 60 new films for the next three years. And it reported that the $300-million sale of its U.S. and European theaters to a Spanish affiliate of Interpart is “moving forward.”

Subject to Shareholder Approval

Cannon unveiled the proposed reorganization plan at a press conference Tuesday in London. The plan had been postponed until after settlement of a securities fraud complaint brought by the Securities and Exchange Commission. Major details of the plan remain to being developed, the announcement said.

Moreover, the company said the proposed restructuring is subject not only to shareholder and other approvals but to “satisfactory and timely resolution” of stockholder suits pending against Cannon.

Several suits were filed last year in U.S. District Court in Los Angeles. They are still in early stages, according to Ernest Kaufmann, attorney in a class action against Cannon, and no settlement talks have been held. The suits allege that Cannon misrepresented its finances and falsely inflated its stock price. The actions predated the SEC’s suit, which was filed Nov. 9 simultaneously with a consent agreement signed by Cannon.

Board Members Named

Cannon said the formal reorganization proposal will include appointment of an executive committee comprising Golan and Globus, along with Frederic Scheer and Giancarlo Parretti of Interpart, who became Cannon officers and directors this year. The committee will “manage the day-to-day operations of the new Cannon-Melia Group,” the announcement said.

Meanwhile, it was also disclosed at the press conference that several people were elected to an expanded 15-member Cannon board on Nov. 30.

One is Bob Hankes-Drielsma, a director of Interpart-controlled Melia International N.V., a real estate and tourism company traded on the Amsterdam Stock Exchange. Another new director is Fiorio Fiorini, managing director of Sasea Holding S.A., a Swiss merchant bank that is also affiliated with Interpart. Fiorini also is a director of Interpart and various other European financial and real estate concerns, the announcement said.

The third new director is Bernard Laurent, a director and vice president of Interpart and a former senior vice president of Dillon, Read Ltd. of London. Barbara Darder, a banker and a managing director of Interpart, was designated as a nominee to fill an anticipated vacancy on the Cannon board.

Cannon observer Lisbeth Barron, a research vice president at Balis Zorn Gerard Inc., a New York investment firm, had compiled a European press articles relating to the purchase of Melia, then a Spanish travel firm, in November, 1986, by Interpart and Sasea.

An article last March described Melia as an Interpart subsidiary.

Another, on May 8, referred to “Interpart and Sasea, the Italian-Swiss group,” and related its plans for Melia. On that date, another article reported Interpart’s purchase of Renta Inmobiliaria, the Spanish firm that more recently contracted to buy Cannon’s theaters and lease them back to Cannon.

Barron said she could not see how the reorganization could await the end of the Cannon stockholder suits, “which could take years.”

As outlined in Tuesday’s announcement, she said, the proposed Cannon restructuring could be good for the firm’s stockholders and bondholders.

Cannon has been plagued by losses aggregating $101.8 million in a 21-month period ended Oct. 3. Since mid-October, it had $14 million in overdue interest to bondholders. However, the payments were made out of $68 million in advances in mid-November from “a group of companies related to Interpart,” Cannon said Nov. 24.

A long-delayed annual meeting for Cannon is expected in early 1988, the Tuesday announcement said. It said the new directors would be in management’s slate of nominees at that time.