Initial Entertainment Group and Intermedia are finally partingcompany following an agreement whereby Initial president Graham King andpartner and chief operating officer Colin Cotter will acquire Initial fromIntermedia through their investment company Parliament Pictures.

As a result of the amicable deal Initial will no longer be anIntermedia subsidiary. Both Initial under King and Cotter and Intermedia underchairman Moritz Borman will continue to finance, produce, acquire anddistribute films worldwide.

"When Graham and Colin made us an offer that would be financiallybeneficial to both companies we discussed it, worked out the details and madethe deal," Borman said in a statement.

"Intermedia and Initial had a great run together and we will worktogether on future projects."

"Moritz and Intermedia were terrific in making this work," Kingadded. "This transaction sets us up as our own bosses again and both sides comeout winners. Working within the Internationalmedia Group has been great andwe'll team up on other projects as we go forward."

Intermedia's parent IM Internationalmedia AG purchased 100% ofInitial in January 2002 and subsequently transferred its interest toIntermedia.

In its nine years of operation Initial has acquired, produced orco-produced around 35 films for distribution including Traffic, Gangs Of NewYork and Ali. Most recently it produced MartinScorsese's upcoming Howard Hughes epic The Aviator starring Leonardo DiCaprio.

The company is in post-production on Rebecca Miller's The RoseAnd The Snake starringDaniel Day Lewis and Lasse Hallstrom's An Unfinished Life, which stars Jennifer Lopez and RobertRedford.

Intermedia's production credits includes Terminator 3: Rise OfThe Machines andupcoming releases such as Oliver Stone's Alexander starring Colin Farrell, Angelina Jolieand Anthony Hopkins and Renny Harlin's Mindhunters, which stars James Todd Smith (aka LLCool J) and Christian Slater.

For Intermedia, the deal meansthat the company will save a significant amount of money that would have becomedue to Initial in the near future. Intermedia will also experience a major reductionin overhead and development costs as well as a major reduction in itsliabilities.

According to IM Internationalmedia, a "decisive factor" for the sale of Initial was "the decline of Initial's operative result from Euro 25.5m in 2002 to Euro -7.1m last year." It said the move would generate savings of at least Euros 16.5m, and that the group would retain film rights with an aggregate value of Euros 4m as well as overages from Traffic, Gangs Of New York, Ali and The Aviator amounting to at least Euros 11.5m.

In a statement, it noted that "as another consequence of the sale, the Internationalmedia group will reduce bank liabilities by Euro 64.9m, which will remain with Initial" and pointed out that the final financial statement for 2003 is "very likely" to be delayed until April so as to incorporate the result from the deal.

For King and Cotter, who havebeen pursuing their freedom from Intermedia for some time, the independencemeans that they can pursue a new path of growth for Initial while maintainingcertain Initial library titles.

Ironically Intermedia andInitial will be competing with each other during this year's awards season. Alexander and The Aviator are considered two of the biggest - and most expensive - contenders for awards atyear-end.

Martin Blaney in Berlin contributed to this report