Shares in Intermedia plummeted 65% on Monday after it cancelled a merger with production firm Spyglass Entertainment and slashed its earnings forecast.
In an ad hoc disclosure to Frankfurt's Neuer Markt, the company said that Nigel Sinclair, Guy East and Moritz Borman will continue in their positions as co-chairmen of Intermedia. East and Sinclair had been expected to step down to make way for Spyglass co-chiefs Gary Barber and Roger Birnbaum, cashing in much of their shares in the process.
Intermedia now expects earnings before interest and tax (EBIT) to be "slightly negative" when it reports annual results on March 14, compared to previous estimates of around Euros 25m. The company had hoped the Spyglass acquisition would boost its sales to more than Euros 1bn.
Trading on Intermedia's Neuer Markt-listed stock was suspended after news of the failure of the deal. It reopened with a 64.77% dive to Euros 6.7. Chief executive officer Florian Bollen offered his resignation from the management board in the initial announcement.
Merck Finck & Co declared that "sentiment for the stock will be negative for the next six months on the basis of this news... We therefore downgrade to sell".
The company, which is listed as Internationalmedia (IM), said that it agreed to terminate merger negotiations this weekend after it decided to internally reorganise. It confirmed it is relocating further operations from London to Los Angeles as part of its strategy to focus on high-profile event movies.
"The merger negotiations were mutually halted after IM's subsidiary Intermedia decided to internally reorganise," Intermedia said. "The chairmen of both companies reached unanimous agreement this weekend to terminate the transaction."
Intermedia had already made one profit warning in January when the company announced its nine month figures. Estimates put total 2001 sales at Euros 280m instead of the initially anticipated Euros 355m. Year-end EBIT had initially been predicted to be Euros 47.2m.
The company said that its EBIT loss was due to reorganisation and changes in accounting principles. Intermedia was due to publish its 2001 earnings last Thursday, but said a change of auditor and the need to consolidate the acquisition of Initial Entertainment Group and conclude the Spyglass deal had caused a delay. The company said it had dropped KPMG as its auditor in favour of PricewaterhouseCoopers because of the latter's experience in the film business
Additional reporting by Martin Blaney