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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 28, 1994
SPELLING ENTERTAINMENT GROUP INC.
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(Exact name of registrant as specified in its charter)
Florida
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(State or other jurisdiction of incorporation)
1-6739 59-0862100
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(Commission (IRS Employer
File Number) Identification No.)
5700 Wilshire Boulevard
Los Angeles, California 90036
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(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (213) 965-5700
N.A.
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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ITEM 5. OTHER EVENTS.
On June 28, 1994, Spelling Entertainment Group Inc. (the "Registrant")
entered into a letter agreement (the "Letter Agreement") with Blockbuster
Entertainment Corporation ("BEC") in which the Registrant and BEC have agreed
in principle to an exchange transaction (the "Exchange") in which BEC will
deliver to the Registrant 7,168,702 ordinary shares, [Pounds] 0.008 par value
per share ("Ordinary Shares"), of Virgin Interactive Entertainment plc ("VIE")
and options to acquire 550,000 Ordinary Shares in exchange for the delivery by
the Registrant to BEC of shares of its common stock, par value $.10 per share,
upon the terms set forth in the Letter Agreement.
Consummation of the Exchange requires, among other things, the
negotiation, execution and delivery of a definitive exchange agreement between
the Registrant and BEC, receipt by the Registrant of a fairness opinion from
its financial advisor, approval of a majority of the disinterested directors of
the Registrant and consummation of certain transactions between BEC and certain
shareholders of VIE.
The description herein of the Letter Agreement is qualified in its
entirety by reference to copies of the Letter Agreement and the Press Release,
dated June 29, 1994, copies of which are attached hereto as Exhibits 99.1 and
99.2, respectively, and which are incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
The Exhibits to this Report are listed in the Exhibit Index set forth
elsewhere herein.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SPELLING ENTERTAINMENT GROUP INC.
By: /s/ Thomas P. Carson
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Thomas P. Carson
Senior Vice President and
Chief Financial Officer
Date: June 29, 1994
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SPELLING ENTERTAINMENT GROUP INC.
EXHIBIT INDEX
Number and Sequential
Description of Exhibit Page Number
- - ---------------------- -----------
1. None
2. None
4. None
16. None
17. None
20. None
23. None
24. None
27. None
99.1 Letter Agreement, dated as of June 28, 1994, by
and among Blockbuster Entertainment Corporation
and Spelling Entertainment Group Inc.
99.2 Press Release, dated June 29, 1994.
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EXHIBIT 99.1
June 28, 1994
Blockbuster Entertainment Corporation
One Blockbuster Plaza
200 South Andrews Avenue
Ft. Lauderdale, FL 33301
Attention: Steven R. Berrard
Gentlemen:
We understand that Blockbuster Entertainment Corporation, a
Delaware corporation ("BEC"), has entered into the following agreements with
respect to the Ordinary Shares (the "Ordinary Shares") of Virgin Interactive
Entertainment plc, a company organized under the laws of the United Kingdom
("VIE"):
(i) a Share Purchase Agreement, dated June 22,
1994 (the "Share Purchase Agreement"), with certain
shareholders of VIE (the "Vendors") pursuant to which BEC has
agreed to purchase 5,049,434 Ordinary Shares for an aggregate
purchase price of $122,256,901; and
(ii) an Option Assignment Agreement, dated June
22, 1994 (the "Devereux Agreement"), with Robert Devereux
pursuant to which BEC has agreed to purchase for the purchase
price of $4,840,000 options held by him to acquire 550,000
Ordinary Shares from VIE.
We also understand that BEC purchased 1,864,444 Ordinary Shares for an
aggregate purchase price of $30,203,993 pursuant to an Option Agreement, dated
as of November 9, 1993 (the "Option Agreement"), by and among BEC and certain
of the Vendors, and that BEC will enter into a Share Purchase Agreement (the
"Management Share Purchase Agreement") with certain senior executives of VIE
pursuant to which BEC will purchase 254,824 Ordinary Shares from such
individuals for an aggregate purchase price of $5,478,716. Thus, upon
consummation of the transactions contemplated by the Share Purchase Agreement,
the Devereux Agreement and the Management Share Purchase Agreement
(collectively, the "VIE Agreements"), BEC would own 7,168,702 Ordinary Shares
as well as options to acquire 550,000 Ordinary Shares from VIE (collectively,
"BEC's VIE Interests"), with an aggregate cost of $162,779,610 plus the fees
and expenses incurred by BEC in connection with its acquisitions of BEC's VIE
Interests ("BEC's Cost"). In connection with the consummation of the
transactions contemplated by the Share Purchase Agreement, BEC and the Vendors
will enter into a Shareholders Agreement (the "Shareholders Agreement").
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This letter sets forth the terms and conditions of our
agreement in principle with respect to the exchange by Spelling of shares of
its common stock, $.10 par value per share ("Spelling Common Stock"), for BEC's
VIE Interests (the "Spelling Exchange").
1. Closing Date. The closing of the Spelling Exchange
(the "Closing") will occur immediately following the consummation of the
transactions contemplated by the VIE Agreements.
2. The Exchange. At the Closing, BEC (or the wholly
owned subsidiary of BEC having purchased the Ordinary Shares pursuant to the
VIE Agreements) will deliver to Spelling BEC's VIE Interests in exchange for a
number of shares of Spelling Common Stock equal to the quotient of (I) BEC's
Cost, divided by (II) $8.95, which represents the average closing price of
Spelling Common Stock on the New York Stock Exchange Composite Tape, as
reported in The Wall Street Journal (Southeast Edition), on the five trading
days ending June 27, 1994.
3. Definitive Agreement. Spelling and BEC will
negotiate in good faith a definitive agreement (the "Definitive Agreement")
with respect to the transaction contemplated by paragraph 2 above mutually
satisfactory to the parties hereto. The Definitive Agreement will contain
customary representations and warranties; provided that BEC shall make no
representations and warranties concerning the businesses, assets or properties
of VIE. The Definitive Agreement will also contain covenants and conditions
customary for transactions of this type, including, without limitation, the
following conditions to closing:
(a) approval by a majority of Spelling's disinterested
directors, collectively constituting the Special
Committee of the Board of Directors of Spelling (the
"Special Committee");
(b) the receipt by the Special Committee of an opinion
from its financial advisor that the Spelling Purchase
is fair to all of Spelling's stockholders (other than
BEC and its affiliates) from a financial point of
view; and
(c) consummation of the transactions contemplated by the
VIE Agreements.
The Definitive Agreement will also contain provisions pursuant to which (i) BEC
will assign to Spelling at the Closing all of its indemnification rights under
the Option Agreement and the VIE Agreements, it being understood that it is the
intent of BEC and Spelling that Spelling receive the benefit of such
indemnification rights, and (ii) BEC will assign to Spelling at the Closing all
of its rights and obligations under the Shareholders Agreement. The Definitive
Agreement will also contain a put option and a call option (collectively, the
"Option") pursuant to which BEC may require Spelling to purchase from BEC and
Spelling may require BEC to sell to Spelling, respectively, all Ordinary Shares
(the "Option Shares") acquired by BEC pursuant to the Put
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Option or the Call Option (as defined in the Share Purchase Agreement). The
purchase price to Spelling for the Option Shares (the "Option Price") will be
the cost of such Option Shares to BEC, minus the Initial Consideration Stock
Deficit (as defined in the Share Purchase Agreement), if any. Spelling may pay
the Option Price in cash or a number of shares of Spelling Common Stock equal
to the quotient of (I) the Option Price, divided by (II) the average closing
price of Spelling Common Stock on the New York Stock Exchange Composite Tape,
as reported in The Wall Street Journal (Southeast Edition), on the ten trading
days immediately preceding the day prior to exercise of the Option. The
Definitive Agreement will also provide that each outstanding option to acquire
Ordinary Shares held by employees of VIE will be converted into the right to
receive, upon payment of the exercise price (as adjusted as set forth below)
the number of shares of Spelling Common Stock determined by multiplying (I) the
number of Ordinary Shares into which such option was exercisable immediately
prior to the Closing by (II) the quotient of (x) 21.50, divided by (y) the
average closing price of Spelling Common Stock on the New York Stock Exchange
Composite Tape, as reported in The Wall Street Journal (Southeast Edition), on
the five trading days immediately preceding the day prior to the Closing (the
"Average Price"). The exercise price for such employee options will be
adjusted by multiplying such exercise price by the quotient of (I) one, divided
by (II) the quotient of (x) 21.50, divided by (y) the Average Price. To the
extent required by, or desirable under, the tax laws of the United Kingdom,
certain options held by VIE employees will be cancelled and regranted in
accordance with the foregoing formula.
4. Governing Law. This agreement in principle shall be
governed by and construed in accordance with the laws of the State of Delaware.
5. Letter Non-binding. Except for the first sentence of
paragraph 3 (which shall be a legally binding obligation of the parties
hereto), this letter is an expression of our mutual intention with respect to
the transactions contemplated hereby and does not constitute a binding
obligation.
6. Termination. This agreement in principle shall
terminate on July 31, 1994, without liability or obligation on the part of any
party hereto other than for a breach of the obligations under the first
sentence of paragraph 3; provided that this agreement may be terminated prior
to such date by written notice to the other party hereto upon a breach of the
other party of its obligations hereunder.
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Please acknowledge your acceptance of and agreement with the
terms of this letter by signing and returning the enclosed copy.
Very truly yours,
SPELLING ENTERTAINMENT GROUP INC.
/s/ Thomas P. Carson
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By: Thomas P. Carson
Its: Senior Vice President, Treasurer
and Chief Financial Officer
Accepted and agreed to this
28th day of June, 1994:
BLOCKBUSTER ENTERTAINMENT CORPORATION
/s/ Steven R. Berrard
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By: Steven R. Berrard
Its: Vice Chairman, President and
Chief Operating Officer
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EXHIBIT 99.2
FOR IMMEDIATE RELEASE
BLOCKBUSTER, SPELLING AND VIRGIN ANNOUNCE
ACQUISITION OF VIRGIN INTERACTIVE ENTERTAINMENT
FORT LAUDERDALE, FL, June 29, 1994 -- Blockbuster Entertainment
Corporation (NYSE:BV), Spelling Entertainment Group Inc. (NYSE:SP) and the
Virgin Group of Companies jointly announced today the acquisition of Virgin
Interactive Entertainment plc (VIE), one of the world's leading developers,
publishers and distributors of interactive entertainment software.
Blockbuster has entered into a definitive agreement to acquire 55 percent
of VIE from Richard Branson's Family Trusts and certain other shareholders of
VIE. The acquisition will increase Blockbuster's ownership of VIE to
approximately 75 percent. The Blockbuster acquisition is subject to customary
conditions and is expected to close in July 1994. Virgin shareholders will
retain a 10 percent interest in VIE which may be acquired by Blockbuster under
certain circumstances pursuant to a put/call arrangement.
Separately, Spelling has entered into a non-binding letter of intent with
Blockbuster to acquire Blockbuster's entire interest in VIE, including the
additional shares which Blockbuster will purchase, at Blockbuster's cost. The
letter of intent contemplates that Spelling will purchase Blockbuster's VIE
interest by issuing Blockbuster approximately $165 million of Spelling common
stock. The letter of intent also contemplates that Spelling may acquire from
Blockbuster the 10 percent interest in VIE which is subject to the put/call
arrangements. The Spelling acquisition is subject to negotiation of a
definitive agreement, approval by the Spelling Board of Directors (including
the disinterested Directors), receipt of a fairness opinion and other customary
closing
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conditions. Subject to such conditions, it is intended that the acquisition by
Spelling will close shortly after Blockbuster acquires its additional 55
percent interest in VIE. Upon completion of the Spelling acquisition, Spelling
would own approximately 75 percent of VIE and Blockbuster would increase its
ownership of Spelling common stock from approximately 70.5 percent to
approximately 77 percent.
Steven R. Berrard, Blockbuster's President and Chief Operating Officer
and Spelling's President and Chief Executive Officer, said: "The superior
quality of VIE's senior management team, its employees and developers and its
broad distribution network are a perfect complement to our creative talent
base, substantial programming library and global multimedia distribution
capabilities. This transaction gives us the ability to realize the enormous
potential synergies between the development of filmed entertainment products
and interactive software."
He added: "We fully intend to use the marketing expertise of Blockbuster
and its more than 4,250 retail locations worldwide to strengthen the
distribution of VIE products throughout the world. This transaction signifies
Spelling's commitment to expand the breadth of its businesses as a public
company."
Robert Devereux, the Chairman of Virgin Communications Limited, said:
"Blockbuster and Spelling are uniquely qualified to enhance VIE's position as
one of the world's leading interactive software companies. At a time when the
industry is facing many new exciting opportunities, the competitive advantage
presented by this association gives us great confidence that VIE's business
will flourish. The significant stake being retained by Virgin is strong
evidence of our belief in the future prospects of the company."
VIE develops, publishes and distributes video game and entertainment
software compatible with all leading consumer hardware systems, including
Nintendo and Sega 8-bit and 16-bit consoles and portable systems, personal
computers and CD-ROM systems. Its titles feature proprietary content as well
as intellectual properties licensed from others, and are sold worldwide to
retailers, distributors and mass merchants.
Last year, VIE published 31 titles across a variety of product
categories, including best-selling titles such as Monopoly Deluxe, Cool Spot,
Terminator, Aladdin, Robocop vs Terminator and The Seventh Guest, the most
successful CD-ROM title of 1993. VIE will
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soon release games based on Walt Disney's Jungle Book and the newly-released
The Lion King, an animated feature film which is expected by industry experts
to be the year's biggest box office hit, as well as The Eleventh Hour, the
much-anticipated sequel to The Seventh Guest. Over 200 versions of more than
90 entertainment titles have been published by VIE, with more than 13 million
copies of its entertainment software products having been sold since July 1990.
VIE plans to continue operating its business under the "Virgin" brand
name after the completion of these transactions.
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Contact:
Steven R. Berrard
Wally Knief
Blockbuster
(305) 832-3000
Thomas P. Carson
Spelling
(213) 965-5820
Paul Downes
Georgeson & Co.
071-454-7100
