Time Warner in talks to `merge` with MGM - could James Bond have a new owner?

19-Dec-2003 • Bond News

The Hollywood industry publication Variety is reporting that Time Warner Inc. is in active merger talks with Metro-Goldwyn-Mayer Inc., the largest movie studio that is not part of a larger media conglomerate, according to CNN.

Time Warner already owns two major studios - Warner Bros, home of the successful Harry Potter series of films, and New Line Cinema, home of the Lord of the Rings trilogy, which opened its third movie this week to strong reviews. MGM`s strongest franchise is the long-running James Bond series.

Calls to MGM were referred to the studio`s West Coast office, and a spokesman there was not immediately available for comment. A spokeswoman for Time Warner also had no comment on the report.

But one person at one of the companies said that while there are discussions going on, nothing is imminent.

The move would be somewhat out of character for Time Warner, which has concentrated on selling assets in recent years, not acquiring them, as it tries to cut its debt.

It recently agreed to sell its Warner Music unit for $2.6 billion, and it sat out the bidding for the Vivendi Universal`s U.S. entertainment assets, including Universal Pictures, assets for which MGM acknowledged making an unsuccessful bid. General Electric`s NBC is merging its operations with Vivendi Universal Entertainment in the United States.

But Time Warner top executives said recently that efforts to reduce debt are ahead of schedule and that a strong cash flow had lessened the need for asset sales.

A sale of MGM, controlled by financier Kirk Kerkorian, is less of a surprise. It had been widely assumed that the company needed a combination with a larger media operation, and when its bid for Universal Pictures fell short, a sale became more likely.

Variety reported that MGM Chairman and CEO Alex Yemenidjian told reporters at an investors conference last week that MGM would only consider a full-blown merger rather than a sale of individual assets. He said he was not suggesting any specific negotiations were ongoing at that time, however.

The trade publication said MGM`s chief asset is its 4,000-plus movie library, especially when DVD sales are becoming the most important revenue stream for studios as past movie hits are scoring new sales in the DVD format. Warner Bros. distributed MGM home video titles for several years until 1999, Variety noted, and it already owns rights to pre-1985 MGM titles.

In its report, Variety quoted bankers as saying the film library alone is worth $18 a share, or about $4.4 billion. Shares of MGM (MGM: up $0.85 to $17.10, Research, Estimates) jumped about 5 percent in active New York Stock Exchange trading Thursday.

Kerkorian owns about two-thirds of MGM shares outstanding. Variety said he bought most of his shares for about $15 apiece when he reacquired control of the studio in 1996.