StudioCanal is to throw Jean Labadie's Bac Majestic group a desperately-needed financial lifeline. But it will kill off the Bac Distribution joint venture and instead take theatrical releasing of its films in-house.

"StudioCanal and Bac Majestic are seeking, in the framework of the ongoing discussions, the means to assure the release of all the movies scheduled by their subsidiaries in the coming months," a joint statement said.

Bac Distribution was set up three years ago as a venture 80% owned by StudioCanal, but with management control belonging to Labadie's Bac Films. With sister-company, Mars Distribution, it served as the French releasing channel for films financed and produced by StudioCanal.

Although the terms of the divorce between StudioCanal and Bac Majestic have yet to be finalised, it seems that StudioCanal will pay Bac Majestic a sum, which many have speculated will be in the Euros12m-Euros13m range. For this, StudioCanal will get Mars Films and its head Stephane Celerier. Also included may be a package of film rights. Bac Distribution will revert to Bac Majestic. There will, however, be no question of StudioCanal making any investment in Bac Majestic, according to the statement.

For StudioCanal the decision to take control of its own distribution through the takeover of Mars fits its strategy of becoming smaller and more streamlined. It will no longer be involved with financing or distribution of big-budget US pictures and will concentrate instead on French and other European titles.

The cash provided by the deal is a welcome reprieve for Bac Majestic, which for months has been facing a mounting cash crisis. Cedric Klapish has reportedly not yet received payment for Europudding (L'Auberge Espagnol), which Mars scored 2.8 million admissions with. It is understood to owe large sums to trade creditors including laboratory Eclair, sub-titler LTC, ad group Paname and poster companies Decaux and Metrobus.

Until last week Bac Majestic had hoped to raise Euros13.5m through a share issue that would have seen Belgian-Russian entrepreneur Michel Litwak end up owning 75% of the group. But the deal was blocked by the stockmarket authorities when they discovered that Litwak had not correctly disclosed a 1980s conviction for financial wrongdoing in the US.

"We have weathered the current crisis," said Bac's general manager Alain Mamou-Mani. "The deal with StudioCanal will provide us with the cash necessary to ensure the release our upcoming titles."

Bac Majestic is still in a bitter dispute over the ending of Bac Films' output deal with Miramax. Bac Majestic has claimed that TF1 used its might as the country's leading free-TV broadcaster to pressure Miramax into ending its relation with Bac Films and set up the new TF/M distribution joint venture which launches its first film this week. A court ordered a raid on TF1's offices last week, but this has since been over-turned on appeal.

Bac Majestic lost some Euros13m last year, with the largest part of the losses coming from its Majestic Cinema multiplex circuit, most of which it operates in the South of France. It is widely expected that these cinemas will have to be sold.