Carolco and Live Enter Merger Talks : Film industry: The deal would be done through a stock swap. Analysts believe that it would make both firms more efficient.

Carolco Pictures Inc. and its majority-owned Live Entertainment Inc. have entered into discussions about a possible merger, the two companies announced Monday.

The terms have yet to be determined, but executives at both companies said the merger probably would be accomplished through a stock swap. Live said it has formed a special committee of board members not affiliated with Carolco to assist in negotiations.

Van Nuys-based Live’s main business is home video distribution, though it also owns a chain of music stores. Carolco, the independent motion picture company behind the “Rambo” series and the upcoming “Terminator 2: Judgment Day,” owns 54% of Live. The remaining company shares not owned by Carolco are valued at about $60 million.

Entertainment analyst Steven Hill of Sutro & Co. said the merger probably would benefit both companies. “They should be merged to be more efficient,” Hill said. “It’s been an odd arrangement.”

Live Chairman Wayne Patterson said the merger would streamline operations and provide Carolco, which reportedly has been cash poor lately, with additional money for movie production. “The combination of Live and Carolco would create Hollywood’s leading independent motion picture production and video distribution company,” Patterson said.

Roger Smith, executive vice president at Carolco, said merger negotiations should take about a month. “The point is to get the best value for both sets of shareholders,” he said.

Live stock rose $1.875 to $12 a share after the announcement. Carolco stock was up $1.25 to $7.75 a share in New York Stock Exchange trading.

Live is the company formerly headed by Jose Menendez, who was gunned down in his Beverly Hills home along with his wife two years ago. Their two sons have been charged with the crime.

Los Angeles-based Carolco, known for big-budget action movies, recently announced the sale of $15 million of its stock to an Italian media company, Rizzoli Corriere Della Sera Group. Other foreign companies have also purchased interests in Carolco in recent months.