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Sony-led group in talks to buy MGM for $5bn
By Peter Thal Larsen in New York
FT
April 22 2004 0:20
A group led by Sony, the Japanese electronics giant, is in talks to
buy Metro-Goldwyn-Mayer in a deal that would value the famed Hollywood
studio at around $5bn.
Sony and two private equity firms, Providence Equity Partners and
Texas Pacific Group, have been examining MGM's books with a view to
making an offer, people close to the situation said. However a deal -
if one is finalised - is believed to be several weeks away.
The talks represent the latest instalment in the long-running drama of
MGM's future. It boasts a film library stocked with classics such as
Annie Hall and The Pink Panther but has increasingly become an anomaly
in an industry dominated by integrated media conglomerates.
Kirk Kerkorian, the billionaire investor who controls 75 per cent of
MGM, has in recent years explored a variety of options including a
sale to another studio or a merger with a media rival.
A few years ago he held talks with Sony about a possible deal which
fell apart on a disagreement about price. Last year, an MGM-led
consortium - which included Providence - was one of the losing bidders
in the auction of Vivendi's US media assets, including Universal
Studios. The deal now under discussion would see Sony and its partners
make an offer for MGM valuing the company's equity and debt around
$5bn.
Although MGM is debt-free, its management has drawn up a plan to pay
investors a special dividend of about $8 per share.
Any deal with Sony would not be finalised until after the dividend -
which is expected to cost the company around $1.9bn - had been
distributed. MGM shares closed up $2.10 at $19.75. MGM, Sony,
Providence and Texas Pacific all declined to comment.
A deal would allow Sony to merge its film library with MGM's,
generating big cost savings and giving it more clout in negotiations
with cable operators and DVD retailers.
Bringing in private equity investors would enable Sony, which has
generally been cautious about acquisitions, to spread the cost of the
purchase.
News of the talks may spur other media groups such as Time Warner to
consider a possible offer for MGM, people familiar with the matter
said.
But industry observers warned that MGM executives were notorious for
talking about possible deals without completing them.
"They open up their books every year and say: come buy us," one
Hollywood insider said. "It's a rite of spring." Indeed, Mr Kerkorian
has owned the studio on three separate occasions in the past 35 years.
Although MGM retains its famous logo of a roaring lion, it has faded
since its heyday in the 1930s and 1940s, when Louis B. Mayer made it
Hollywood's largest studio, producing hits such as Gone with the Wind
and the Wizard of Oz.
In recent years chief executive Alex Yemenidjian has concentrated on
developing cash flow from MGM's library while limiting its investment
in new movies, aside from proven blockbusters such as the James Bond
films.
From: Emil Lazarian | Ararat NewsPress
By Peter Thal Larsen in New York
FT
April 22 2004 0:20
A group led by Sony, the Japanese electronics giant, is in talks to
buy Metro-Goldwyn-Mayer in a deal that would value the famed Hollywood
studio at around $5bn.
Sony and two private equity firms, Providence Equity Partners and
Texas Pacific Group, have been examining MGM's books with a view to
making an offer, people close to the situation said. However a deal -
if one is finalised - is believed to be several weeks away.
The talks represent the latest instalment in the long-running drama of
MGM's future. It boasts a film library stocked with classics such as
Annie Hall and The Pink Panther but has increasingly become an anomaly
in an industry dominated by integrated media conglomerates.
Kirk Kerkorian, the billionaire investor who controls 75 per cent of
MGM, has in recent years explored a variety of options including a
sale to another studio or a merger with a media rival.
A few years ago he held talks with Sony about a possible deal which
fell apart on a disagreement about price. Last year, an MGM-led
consortium - which included Providence - was one of the losing bidders
in the auction of Vivendi's US media assets, including Universal
Studios. The deal now under discussion would see Sony and its partners
make an offer for MGM valuing the company's equity and debt around
$5bn.
Although MGM is debt-free, its management has drawn up a plan to pay
investors a special dividend of about $8 per share.
Any deal with Sony would not be finalised until after the dividend -
which is expected to cost the company around $1.9bn - had been
distributed. MGM shares closed up $2.10 at $19.75. MGM, Sony,
Providence and Texas Pacific all declined to comment.
A deal would allow Sony to merge its film library with MGM's,
generating big cost savings and giving it more clout in negotiations
with cable operators and DVD retailers.
Bringing in private equity investors would enable Sony, which has
generally been cautious about acquisitions, to spread the cost of the
purchase.
News of the talks may spur other media groups such as Time Warner to
consider a possible offer for MGM, people familiar with the matter
said.
But industry observers warned that MGM executives were notorious for
talking about possible deals without completing them.
"They open up their books every year and say: come buy us," one
Hollywood insider said. "It's a rite of spring." Indeed, Mr Kerkorian
has owned the studio on three separate occasions in the past 35 years.
Although MGM retains its famous logo of a roaring lion, it has faded
since its heyday in the 1930s and 1940s, when Louis B. Mayer made it
Hollywood's largest studio, producing hits such as Gone with the Wind
and the Wizard of Oz.
In recent years chief executive Alex Yemenidjian has concentrated on
developing cash flow from MGM's library while limiting its investment
in new movies, aside from proven blockbusters such as the James Bond
films.
From: Emil Lazarian | Ararat NewsPress