PolyGram to Buy MCA’s Gramercy Stake

European entertainment conglomerate PolyGram agreed on Monday to buy out MCA Inc.’s 50% stake in their Gramercy Pictures joint venture.

Gramercy, which was established in 1992, is a distributor of smaller, specialized pictures for both PolyGram and MCA’s Universal Pictures unit.

The bulk of the films distributed to date have been PolyGram-financed films, with the biggest hit being PolyGram’s “Four Weddings and a Funeral.” Gramercy has also handled a number of critically acclaimed films, most recently “Dead Man Walking.”

No price was announced, although sources put it at $5 million to $10 million. Other recent films Gramercy has distributed include “The Adventures of Priscilla, Queen of the Desert” and “The Usual Suspects.” PolyGram has been aiming toward building its own distribution system.

In an interview, Michael Kuhn, president of PolyGram Filmed Entertainment, said the Gramercy experience has given the company valuable lessons in how to distribute movies. Kuhn said Gramercy’s management team, including President Russell Schwartz, will remain in place.

The three-year agreement between PolyGram and MCA expires this week. Gramercy will continue to distribute a handful of smaller films from MCA that have already been scheduled for release this year.

Gramercy initially was designed not only to give PolyGram a place to distribute films, but also to allow Universal to distribute smaller films that might not fit in with the studio’s larger, event film-driven system.

Its involvement in Gramercy was spearheaded by former MCA movie chief Tom Pollock, now a vice chairman at the company.

Sources said that although the buyout was initiated by PolyGram, MCA executives have other priorities in the wake of the sale of the company last year to beverage maker Seagram Co.

Kuhn said that under the previous arrangement, PolyGram used MCA’s computer infrastructure needed in distributing a movie, paying MCA a fee to do so. Now, he said, the company plans to put in its own computer system.

Gramercy is controlled by the Dutch electronics giant Philips.