MGM says it is not for sale, counters contrary reports
26-Aug-2008 • Bond News
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"Contrary to recent media reports, Metro-Goldwyn-Mayer Studios Inc. is not for sale," the studio responded in a statement. "There is no 'asking price' for the company. MGM's existing financing arrangements are sufficient to meet its needs. Goldman Sachs has been retained to explore enhancements to MGM's long-term capital structure. All of the MGM shareholders, including Providence Equity Partners, TPG, Sony Corp. of America and Comcast Corp., are pleased with the company's current momentum and are committed to the future growth of the studio."
Sources at the studio said Goldman Sachs wasn't retained to sell the company but rather to help it handle its debt, a $3.7 billion term loan that expires in 2012. These insiders deny that a pricetag, reportedly set at $5.2 billion, was ever placed on the company.
The BusinessWeek story is a blow to the company, coming on the heels of the highly publicized exit of Paula Wagner from United Artists after a tenure that led to only two films, "Lions for Lambs" and the upcoming "Valkyrie." There has been speculation that MGM was looking to neuter UA in an effort to siphon from UA's own $500 million Merrill Lynch line of credit. But sources said MGM isn't interested in UA's coin and is committed to hiring a veteran film exec to fill Wagner's shoes. Insiders say former Paramount production prexy Alli Shearmur was offered the job to work alongside UA principal Tom Cruise but turned it down.
It's believed that the $500 million funding is contingent on Cruise staying where he is, though some money could be redistributed to film projects that are co-productions between the studios and are given the thumbs-up by Cruise. The actor's reps said he won't leave, either, despite the exit of his longtime partner.
Since relaunching in 2005, the Lion has focused mostly on distributing films from outside producers such as the Weinstein Co. and Sidney Kimmel. Operating with a significantly pared-down distribution staff and a nonexistent production department, the new MGM collected only a few hits in its first two years -- "Rocky Balboa" and "1408" among them.
But over the past year, MGM chief Harry Sloan, who recently reupped for three years, began to reverse course and hired Mary Parent to steer the studio into developing and producing its own content. Though MGM has spent aggressively to develop projects, skeptics have wondered how the studio would finance any homegrown fare. MGM, which has two revolving credit lines through JP Morgan worth $450 million, will soon begin in earnest a campaign to raise coin to cover the budget on at least 12 films that Parent is preparing for production.
The first greenlight by Parent, whose presence will finally be felt with MGM's 2010 slate, is "Cabin in the Woods," a Joss Whedon-Drew Goddard-scripted thriller. Other percolating projects include a "Robocop" remake that David Self is scripting for director Darren Aronofsky. Because of uncertainty for studio productions due to an expired SAG contract, it isn't likely that MGM will put anything major into production until early next year.
The studio is also a partner on the James Bond film "Quantum of Solace" and "Pink Panther 2," both of which will be released domestically by Sony. MGM is partnered with New Line on two films based on J.R.R. Tolkien's "The Hobbit" that are being written by director Guillermo Del Toro with Peter Jackson, Fran Walsh and Philippa Boyens.
MGM will need more coin than it has now to finance those pictures, but it doesn't need that money right now.
What it needs, per insiders, is a strategy to handle a debt bill that is coming due in the next several years. That task has been assigned to Goldman Sachs, which advised MGM in the 2004 sale to Sloan and his backers. The studio denies that it is looking for Goldman Sachs to create an exit strategy for the owners.
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