Indian Animator Seeking Starring Role.

When Mike Scully, executive producer of "The Simpsons," heard that Film Roman, animator of the long-running Fox hit, had agreed to be bought by India-based Pentamedia Graphics Ltd., he quipped that the new owner would probably expect a higher profile for "Apu," the Indian immigrant who works at the Kwik-E-Mart m the Simpson's fictional hometown of Springfield.

It appears, however, that Apu Nahasapeemapetilon's moment in the Springfield sun hasn't arrived just yet.

Last week, Pentamedia's long-planned purchase of a majority stake in North Hollywood-based Film Roman, which also animates "King of the Hill" for Fox and the new Warner Bros. show "The Oblongs," collapsed when the company failed to meet an extended deadline for its first payment on the $15 million deal.

Nevertheless, Pentamedia, which is India's largest multimedia company and trails only the Walt Disney Co. and Industrial Light and Magic in total animation output, remains in an aggressive acquisition mode both locally and overseas. To help elevate its status as a player in film and television production and distribution, the company operates an office in Cerritos that focuses on business development and marketing to the Hollywood community.

"They want to be a presence in the global entertainment marketplace," said John Hyde, chief executive of Film Roman. "To be that presence, you have to be a presence in the U.S. marketplace as well."

Pentamedia officials could not be reached for comment last week, but the company's ambitious expansion plans indicate it is trying to stake its claim as an international media powerhouse on the level of Disney and Universal Studios, both of which produce and distribute licensed content in a broad range of formats.

Pentamedia is currently negotiating to purchase the Hollywood production company Improvision Corp., in a deal worth. an estimated $20 million. Already in 2001, Pentamedia has acquired three Indian companies in cash-and-stock deals. And those acquisitions open new revenue streams in businesses ranging from sports programming and entertainment software to theme parks. In addition, Pentamedia has invested in a Malaysian multimedia center offering high-end training in 2D and 3D animated motion picture capture and special effects that will complement its own 22-acre high-tech campus in Chennai (formerly Madras), India.

The primary focus is clearly on animation, where Pentamedia believes its proprietary software and efficient production process have the potential to trim millions off the budgets of animated Hollywood features. Last year, Pentamedia, in association with Lions Gate Entertainment, released "Sinbad: Beyond the Veil of Mists," the first motion picture to exclusively use 3D technology to capture the movements of live actors and digitally animate them.

Investor skepticism

Pentamedia and its sister corporation, Pentasoft, were formed out of Pentafour Software & Exports in the mid-1990s as the company expanded its focus from software to multi-tiered entertainment. The company's current push is to evolve from primarily an animation workshop to a major content developer for film, television and video games, while expanding its services in the special effects field and CD-ROM and DVD reproduction.

So far, its expansion plans are not impressing investors, said Canal Sanjana, who follows Asian markets for Auerbach Grayson & Co. in New York. Although its share price surged nearly 16 percent last week to 61.5 rupees ($1.29) on news of strong earnings growth, Pentamedia's stock price has tumbled in 2001 along with the overall Indian market and remains down by more than 70 percent for the year.

"These acquisitions into what is essentially a new business have caused concern among shareholders," Sanjana said. "The amount of equity is fairly small and the fear is that you can get diluted fast."

In a recent statement, Pentamedia Chairman and CEO V. Chandrasekaran, a former software programmer who worked in the United States, defended the company's aggressive strategy.

"What one should remember is that, when there's change there's growth, and when there's growth there's an element of sacrifice to it," Chandrasekaran said.

Although both Pentamedia and Film Roman say they plan to continue working toward a deal, Pentamedia's bid for a majority stake in Film Roman, which looked like a sure bet a month ago, is now on the shelf.

Hyde said the collapse of the deal would have little immediate impact on Film Roman because Pentamedia's investment was earmarked primarily for future expansion.

"We have cash, we have no debt and we have shows on the air," he said. "It means our expansion will have to go at a more measured pace than (if) Pentamedia stepped in."

Hyde said the deal fell apart when Pentamedia sought to change the terms from all cash to a combination of cash and future deposit receipts.

"The terms were unacceptable to our board," Hyde said. "There was no guarantee on what the receipts would be worth. There was no guarantee on the dollar amount."

Nevertheless, new ownership could have come as a shot in the arm for Film Roman, which posted net losses of $2.6 million in 2000 and $7.5 million in 1999.

"They have some incredibly innovative software, and they have fabulous 2D and 3D film capture and special effects capabilities," Hyde said. "There would have been a great synergy between the companies."