The two producers behind hit British films Four Weddings and a Funeral and Trainspotting are understood to be in talks with Sony Pictures Entertainment about creating a major force in the UK film production market.
The discussions are thought to be focused on Sony taking a minority stake of about 40% in DNA Films, a National Lottery-backed vehicle run by producers Andrew Macdonald and Duncan Kenworthy.
The agreement would be a significant boost to the government's objective of creating a solid and sustainable UK film industry. It would also meet Sony's strategic aim of decentralising its film production from Hollywood.
The deal would see the Film Council - the body that allocates Lottery cash to DNA - transfer £16m due to DNA under the terms of its existing franchise agreement into the enlarged group.
SPE is expected to invest a similar sum and guarantee that every film produced by DNA would receive a British theatrical release.
The transfer of Lottery money to a vehicle backed by a foreign corporation could prove controversial, and would need approval from the National Lottery Distribution Fund. The deal hinges on this approval being given.
An announcement could be made within the next month.
Negotiations are being led by James Lee, a director of both DNA and the Film Council and a consultant to SPE. Film Council chief executive John Woodward and SPE co-president Ken Lemberger have also been closely involved.
Advisers are keen to make the venture as transparent as possible and offer clear indications on the return the cash is likely to generate. Further funding would come from bank borrowings and tax-based investment.
The new company would set out initially to release 14 films with anticipated gross receipts of £350m to £500m, depending on box office performance. Production costs are estimated at about £140m.
The Lottery cash could only be used to fund development and production, not overheads.
DNA Films is a joint venture between Four Weddings and a Funeral and Notting Hill producer Duncan Kenworthy's Toledo Pictures, and Figment Films, owned by the producer of Trainspotting and The Beach, Andrew Macdonald.
Recent DNA releases include Strictly Sinatra and The Parole Officer, starring Steve Coogan.
