Time Warner to bid $1.5b all-cash offer for MGM
23-Mar-2010 • Bond News
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The owner of CNN and Time Inc magazine group controls Hollywood's largest film library and is seen as placed to generate strong returns from MGM's assets through its distribution network and relationships with pay TV companies.
MGM, saddled with $3.7bn in debt from a 2005 buy-out from a consortium of buyers led by Sony, initially attracted attention across Hollywood and beyond, with companies including News Corp, Liberty Media and AT&T seen as interested. But by last Friday's deadline, only three remained.
MGM confirmed that a "number of bids" had been received and that it would review them over the next few weeks. MGM has not ruled out operating as an independent company.
The studio had hoped to attract bids topping $2bn, but has drawn offers of between $1.2bn to $1.5bn, raising the possibility of MGM lenders pushing for a prepackaged bankruptcy instead of facing a fire sale.
Earlier, Lions Gate and Len Blavatnik, the entrepreneur and owner of Access Industries, the US-based industrial group, placed separate bids, according to a Reuters report. The second-round bids are nonbinding offers.
The studio has struggled to keep afloat of looming debt obligations as it suffered an industrywide slump in DVD sales.
Still, the studio's Bond catalogue, rights to make future Bond films and its development of a film version of The Hobbit attracted interest from potential buyers.
The bidding for MGM coincides with the auction of the Miramax library, owned by Walt Disney, and Overture, the film arm of the Liberty Media Group, in the latest round of consolidation.
Time Warner's strong balance sheet, with close to $5bn in cash and equivalents at the end of 2009, has also made it the frontrunner in the auction, people familiar with the discussions said.
As part of MGM's exploration of strategic alternatives, the company said that it expected to work with lenders to extend the current forbearance period on its bank debt, which ends on March 31.
The company also expects to seek a forbearance agreement for its revolving line of credit, for which a payment is due on April 8.
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