MGM chairman and chief executive says he didn`t want to sell to Sony

Alex Yemenidjian, the chairman and chief executive of Metro-Goldwyn-Mayer, was sitting at his private pool outside his high-roller villa at the Bellagio Hotel and Casino here on Monday - reports DailyNews.

He had just struck a $5 billion deal to sell MGM, the Hollywood studio famous for its roaring-lion mascot and film franchises including James Bond, to Sony and a group of investors after an agonizingly long auction.

But he wasn't interested in talking about the deal. He wanted to discuss why he never wanted to sell the company in the first place and why his boss, elusive billionaire Kirk Kerkorian, who controls MGM and has now bought and sold the studio three times since 1969, did not especially want to give it up, either.

"There is a perception out there that Kirk is a seller if somebody gives him a good price," said Yemenidjian, cutting a 007-like figure in a double-breasted blue blazer with a yellow silk handkerchief protruding from the breast pocket. "That isn't true. I think it bothers him that Hollywood thinks that he treated MGM as an investment toy. Not one time did either Kirk or the board tell me, 'I want you to clean this company up and prepare it for sale.' Not once."

Yemenidjian, 48, has been dogged by his reputation as MGM's flipper-in-chief ever since Kerkorian installed him as its boss in 1999. Back then, the company was beaten and battered, written off as a has-been, a debt-laden stepchild of the studio that once produced films like "Gone With the Wind" and "The Wizard of Oz." And when Yemenidjian arrived on the scene, he was a virtual unknown in Hollywood. If anything, he was considered Kerkorian's henchman, an accountant by training whose experience was in deal making, not movie making.

Yet within five and a half years, Yemenidjian turned around the business by drastically scaling back the studio's productions, scoring a few unexpected hits like the comedy "Barbershop" and the documentary "Bowling for Columbine," and by milking its library of more than 4,000 films for every last dollar of sales.

He won respect on Wall Street, if not fans among the Hollywood elite. Then he performed the final scene of the script that had been written by critics the day he arrived: He sold the studio. In doing so, he made a bundle for Kerkorian -- who banked at least $2 billion -- as well as a small fortune for the company's minority shareholders.

"Bringing an outsider's viewpoint to Hollywood may not have necessarily endeared him to the agents, movie stars and the rest of the quote-unquote Hollywood community, but from a shareholder's standpoint, he's exactly what you'd want in the CEO of a publicly held company," said Jack Liebau, the principal at Liebau Asset Management, one of MGM's largest minority shareholders.

But as Yemenidjian leaned back in his faux 17th-century Tuscan chair, he said he still wished he could have ordered a rewrite and made his own blockbuster acquisitions instead of selling. "We tried to acquire other companies and they weren't available," he said in a rare interview. He ticked off a list of targets that he said he had pursued vigorously: Vivendi Universal. Sony Pictures. Paramount Pictures.

"There was nothing left to buy," he said with a shrug. "And we are not fully integrated like Viacom and Time Warner and Disney and all these companies. There was no place for us to go." So he negotiated himself out of a job.

How Yemenidjian, who, like Kerkorian, is of Armenian descent, came to become Kerkorian's top lieutenant, to run the last independent studio in Hollywood and to sell it in a heated auction between Time Warner and Sony could be its own dramatic release. There is even a potential sequel: for all the sniping by critics in the movie industry, Yemenidjian is being talked about as a possible successor to Michael D. Eisner, who will step down as chief executive of the Walt Disney Co. in 2006.

Yemenidjian was born in Argentina; his father was a shoemaker who had fled Armenia. The family moved to Los Angeles when Alex was 13. He did not speak English, but he was already brokering deals. When the principal of the private Armenian school where he enrolled told him he would have to be held back and start in seventh grade rather than eighth grade because of a lack of English, Yemenidjian returned with a counterproposal.

"I said, 'I'll make you a deal,"' he recalled. " 'I will do the first semester of seventh grade, and, if I get straight A's, I will jump to the second semester of eighth grade.' He went for it because he thought there was no way I could do it."

Of course, Yemenidjian made good. And at school he met his wife, Arda. They have two children -- a daughter, 23, and a son, 19.

Yemenidjian graduated from California State University, Northridge, in 1977 and founded his own accounting firm, focusing on taxation, in 1981. A workaholic by nature -- "I don't do vacation very well," he said -- he went to school at night to get a master's degree in business taxation from the University of Southern California.

He worked during most of the 1980s as an accountant for Hollywood clients like the "Entertainment Tonight" anchor Mary Hart. But, in 1989, Yemenidjian went to a lunch that would change his life. A mutual friend of his and Kerkorian's, George Mason, a managing director of Bear Stearns, planned for them to meet. "For me, it was my opportunity to meet my idol," Yemenidjian said. "I had no idea that this would turn out to be a disguised interview."

Two days later, he recounted, "Kirk asked me if I would take a leave of absence from my firm for six months to work on a special project."

"He never told me what the project was, and I never asked," Yemenidjian said. "When I showed up on Jan. 1, 1990, I found out the project was selling MGM."

That was the second time Kerkorian would sell MGM. He had bought it in 1969, sold it to Ted Turner in 1986 and bought back a large chunk of it only months later, when Turner's financing fell apart.

The second sale, with the help of Yemenidjian, was to the Italian financier Giancarlo Parretti in 1990. But Kerkorian would buy it back again in 1996.

Yemenidjian, who acknowledged that he lacked "any extensive experience negotiating deals," took fast to the role of deal maker. "Being with Kirk for 10 minutes is like going to Harvard for four years," he said.

The two hit it off immediately, creating what friends and associates describe as almost a father-son relationship. "He was the perfect man for Kirk. Just perfect," said Mason, who plays a doubles tennis game at Kerkorian's house every Sunday with Yemenidjian and other friends. "People say Alex would throw himself off a cliff for Kirk. He's always had that attitude."

Mason hesitated for a moment. "I don't know how perfect it is for Alex," he added, "because when you're that anxious to please and you don't want to make a mistake and you care so much and you fret if you do screw up, it is very hard on you."

Kerkorian, 87, who has not given an interview to the news media in decades, said through a spokeswoman, "Alex is one of the most accomplished CEOs I have worked with, and I am very happy with what he and his team have achieved at MGM."

Throwing himself into the role of Kerkorian's right-hand man, Yemenidjian worked on his mentor's attempted takeover of Chrysler, an effort to rescue Trans World Airlines and a bid for Pan Am. In 1995, Kerkorian sent him to Las Vegas to become the president and chief operating officer of the hotel and casino company now known as MGM Mirage, asking him to help turn it around with the chairman, J. Terrence Lanni.

He leapt at the chance. "To me, as long as I was doing what I was doing for Kirk and for the company, I was very much driven by the opportunity and the adrenaline," he said. "It's one of those things where you don't have time to worry about whether you like Las Vegas. I could have been in Timbuktu."

Even now, as he gives a tour of his ornate 5,000-square-foot villa on the grounds of the Bellagio, where he is staying for a board meeting of MGM Mirage, he can recount innumerable details of that experience. "Even though I was working very hard, six days a week and very long hours," he said, "every single morning that I woke up I felt like I was on vacation."

But his Las Vegas act was cut short in 1999. Kerkorian had assigned him to run an executive search to help him find a replacement for Frank Mancuso, who was retiring as MGM's chief. Kerkorian rejected all the candidates and gave the job to Yemenidjian, who had never worked in movies.

It was an audacious move, one that Hollywood questioned immediately. Sir Howard Stringer, the chairman of Sony of America who led the purchase of MGM, acknowledged the resentment that Yemenidjian faced. "Hollywood is not very kind to those who have not spent a lifetime on Sunset Boulevard," he said.

Yemenidjian accepts his reputation as an outsider. "I think I know what they think about me, but I really don't care," he said. "Hollywood is a very strange environment. There's a lot of insecurity. The system sort of breeds that insecurity."

For him, his audience is his shareholders. "That's who I care about," he said. (He does care about how he looks, though. He designs his own clothes, including his trademark shirts with rounded collars.)

Knowing that he was inexperienced in Hollywood's ways, he first looked for a chief operating officer who knew something about the town. He settled on Chris McGurk, president and chief operating officer at Universal Pictures, who warmed to him despite some initial skepticism.

"He clearly was different than what I was used to dealing with," McGurk said. "Everybody I had dealt with who was running a studio or wanted to run a studio was wearing a T-shirt or a tattered sweater and wanted to be the antithesis of a business guy. But at the end of the day he wasn't motivated by the kinds of things that can really steer you wrong in this business: Getting your name on the front page of Variety; having the biggest big box office total and market share total at the end of the year; doing big producer deals with big splashy names that end up breaking the bank. All those things didn't matter to him. That was music to my ears."

The two went about shaking up MGM's business model. Out went high-priced, risky picture deals. "We were within $100 million of running out of money; in this business, that's a movie," Yemenidjian said. The James Bond films, which had been released every two years, were moved to a three-year schedule. Production budgets were cut.

The centerpiece of the turnaround was a renewed focus on eking out additional sales from the company's library, typically an afterthought at other studios. Bonuses were attached to sales of DVDs, and marketing was redesigned. By 2003, the plan had succeeded. They may not have created the next Miramax, but the company was no longer bleeding.

Yemenidjian's all-business, tough-love approach rankled some within and outside MGM. There were back-lot denizens who said his management style, his constant push for profit and Hollywood's questions about the studio's future kept it from getting the best films and people.

McGurk seemed to say as much. "The biggest issue we have had to contend with from a production standpoint is that we're resource-constrained versus the competition," he said. "We spend a lot less on development, a lot less on production and a lot less on marketing than our competitors. Sometimes it feels like we're going out there with peashooters fighting against howitzers.

"But the way we dealt with that was trying to be much more disciplined and smarter in the way we spend our money," McGurk added. "We've been profitable every year."

To Yemenidjian, what matters most is that his plan worked. And he said he has no regrets about his approach. "I don't believe in democracy; I believe in a benevolent dictatorship," he said. "The process of making decisions by building consensus is for Washington."

In fact, he said one of his biggest regrets was that he did not assert himself even more in the creative process. "I wish I had followed my instincts earlier at MGM Studios," he said. "I want to be very careful how I say this. I think I always had a very specific creative point of view. During the beginning of my tenure I tended to yield more to the consensus. Toward the end, the later half of the past five years, I was much more comfortable with my creative instincts. Does that make sense?"

Even though he says that "I love the movie business" -- his favorite film is "The Godfather" -- and that "I love my job," there are some who are not so sure.

"We never discussed this, but I think once he got into it, it wasn't fun; it wasn't as rewarding as the other job," said Mason, referring to Yemenidjian's job in Las Vegas. "There's so much luck involved in the movie business, and a person who wants two plus two to be four has a hard time with that."

What will Yemenidjian do next? Besides the talk about his being a dark-horse candidate for Eisner's job at Disney, there are whispers that he may eventually take over Kerkorian's casino empire, especially if the current boss, Lanni, retires and runs for governor of Nevada, as some have speculated. (Lanni says: "The only thing I'm running for in my life will be for the hills. I don't know what Alex will do.")

Then there is the possibility that Yemenidjian will leave Kerkorian's nest.

"I am not a caretaker," he said. "I either have to be turning around a mess or once something is turned around, growing through acquisitions. But watching the grass grow is something I don't do very well. Do I think there's another challenge for me to face? Yeah, I think so. There'll be a third act. I just don't know what it is going to be."

Thanks to `JP` for the alert.

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