MGM stay tight lipped about Sony take-over plans at annual shareholder`s meeting

30-Jun-2004 • Bond News

Executives at Metro-Goldwyn-Mayer Inc. gave an upbeat presentation to shareholders Tuesday, only hinting at ongoing negotiations that could lead to a sale of the venerable studio to Sony Corp. or another suitor, reports SFGate.

MGM Chairman and Chief Executive Alex Yemenidjian mentioned that the annual shareholder's meeting had been delayed a month to give the company time to consider "strategic alternatives."

"We have more strategic alternatives available to us than we realized," Yemenidjian told about 100 shareholders at the Beverly Hills Hotel.

MGM has been discussing a sale to Sony that would value the studio at $5 billion. Sony would contribute about $1.5 billion of the $3 billion in cash needed to close the deal.

Sony and two investment partners, Texas Pacific Group and Providence Equity Partners, would assume about $2 billion in debt, according to sources familiar with the talks who requested anonymity.

Sony and MGM have continued their talks, even after a 15-day exclusive negotiation period expired in late May.

The snag in closing the deal is that Sony has not been able to agree on financing terms with its partners, which includes how soon the partners would be bought out of their investment by Sony, sources familiar with the talks said.

Meanwhile, Time Warner and NBC Universal have expressed some interest in MGM, although neither company has yet asked to see confidential financial documents that have been made available to Sony, a source said Tuesday.

All of MGM's options remain open, a studio source said, including rejecting all offers and remaining an independent company.

For the past two years, MGM has been looking for ways to grow larger, either through acquisitions or mergers.

The company made an $11.5 billion all-cash bid for Vivendi Universal Entertainment last year, but lost out to NBC. It has also been looking at other possible acquisitions, but has not been willing to overpay, the company said.

"What was available, we didn't like and what we liked wasn't available," Yemenidjian said Tuesday.

MGM is 74 percent owned by billionaire Kirk Kerkorian, who did not attend the meeting.

Studios are primarily interested in MGM because of its vast film library of more than 4,000 titles.

MGM executives have been aggressively packaging titles to sell through its home entertainment division. More than 120 million DVDs were sold in 2003 -- a 52 percent increase over the previous year, MGM vice-chairman and chief operating officer Chris McGurk told shareholders Tuesday.

MGM has also been reviving some of its franchises either on film or on Broadway.

The studio showed clips Tuesday from the upcoming "Pink Panther" film starring Steve Martin. MGM is also working on Broadway versions of movies such as "Legally Blonde" and "Get Shorty."

"Our operating position has never been stronger," McGurk said.

Thanks to `Chris` for the alert.