Polygram pays 18m pounds to get into Hollywood films

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POLYGRAM, Philips' 80 per cent owned entertainment subsidiary, is to pay dollars 35m ( pounds 18.4m) for a 51 per cent stake in Interscope, a privately owned Hollywood film company.

The move into Interscope, whose films include Cocktail and Three Men and a Baby, will significantly increase Polygram's presence in film production and distribution. The London-based company said films could account for a quarter of its turnover in five years.

Polygram's interests in the industry already include Propaganda in Los Angeles, Working Title in Britain and a 30 per cent stake in Andrew Lloyd Webber's Really Useful Holdings.

In May, it formed a joint venture, Gramercy Pictures, with Universal Pictures of the US to distribute films in North America.

Nichola Pease, an analyst with Smith New Court, said the acquisition of a controlling share in Interscope fitted with Polygram's strategy. She expected further deals on the film distribution side.

Polygram said Interscope was known for making highly profitable and highly commercial movies on moderate budgets. The deal brings with it the skills of Ted Field, founder and chairman of Interscope and Robert Cort, the company's president.

A spokesman for Polygram said: 'They have a brilliant track record. If you are going to move into Hollywood you need to be associated with people like that.'

Interscope plans to make eight films over the next two years rising to nine or 10 a year by 1997. These films will initially be distributed by a leading studio in North America and mainly by Polygram elsewhere. Ultimately Polygram aims to take on direct distribution in all major markets.

Interscope will remain autonomous creatively but will develop future movies in-house when current development and production deals with other studios expire.

Polygram is paying for the acquisition from cash flow and available funds. The group, whose shares are listed on the New York and Amsterdam stock exchanges, is today expected to announce interim net profits up by about 15 per cent on last year's first-half income of 147m guilders ( pounds 47m).

Polygram said last year that it planned to spend dollars 200m over the next few years expanding its film interests. However, it now expects to increase that investment. It said there were provisions to limit its working capital exposure if Interscope or certain other units performed significantly below expectations.