Sony consortium to acquire MGM
By Gary Gentile
Associated Press
LOS ANGELES — A consortium led by Sony Corp. has agreed in principle to acquire famed Hollywood studio Metro-Goldwyn-Mayer Inc. for nearly $3 billion, MGM said yesterday.
Associated Press
The company said it received a cash deposit of $150 million yesterday from Sony, along with private equity companies Providence Equity Partners Inc., Texas Pacific Group and DLJ Merchant Banking Partners.
Sony Corp. will buy MGM Studios, home to such classics as, from left, "Ben Hur" and the Pink Panther and James Bond movies. Sony will likely close most of the studio's current production, but MGM's library could generate at least $440 million this year through its DVD titles.
MGM said its management would recommend the deal, which it called a "proposed merger," to its board by Sept. 27.
Sony has agreed to pay $12 per share for MGM, 45 cents more than MGM's closing price of $11.55 yesterday on the New York Stock Exchange. The deal also calls for Sony to assume about $1.9 billion in MGM debt.
Sony's winning bid comes after Time Warner Inc. dropped out of the competition earlier yesterday.
The sale would mark the third time billionaire investor Kirk Kerkorian has sold the film studio, once best known for musical hits such as "Singing in the Rain" and "Meet Me in St. Louis." Kerkorian, through his Tracinda Group, owns 74 percent of MGM's outstanding shares. The sale to Sony would net him about $2.1 billion.
Sony is expected to shutter MGM's current production, with the possible exception of the "James Bond" franchise. MGM also produces films under the United Artists label.
But MGM has a considerable library of more than 4,100 titles, including the "Pink Panther" and "Rocky" franchises. Analysts have estimated MGM's library will generate $440 million in cash flow in 2004 by exploiting only 1,500, or about 36 percent, of its titles on the newer DVD format.
Time Warner was seen as the front-runner for MGM going into the weekend. But Sony raised its offer, setting off a bidding war that Time Warner concluded it did not want.
"As we pledged to our shareholders, we approach every potential acquisition with strict financial discipline," said Time Warner chairman and chief executive Dick Parsons. "Unfortunately, Time Warner could not reach agreement with MGM at a price that would have represented a prudent use of our growing financial capacity."
Parsons, who has often said Time Warner is interested in expanding its presence in cable television, hinted yesterday that the cash it saved from the MGM bid could be used to bolster its cable presence. "We are confident that there are other capital allocation choices that will enable us to continue to build shareholder value," he said.
Time Warner is known to be interested in bidding on the cable assets of bankrupt Adelphia Communications Corp.
Sony also has approached cable television giant Comcast Corp. about becoming a minority investor in the new company after the deal closes, according to a source familiar with those discussions.
A Comcast spokeswoman declined to comment.
