Relativity said to offer MGM $500 million to finance production

Ryan Kavanaugh’s Relativity Media LLC offered Metro-Goldwyn-Mayer Inc. $500 million to make movies as part of a management-led plan to keep the studio independent, two people with knowledge of the situation said.

Kavanaugh, whose West Hollywood, California-based company provides film funds for Universal Studios and Sony Corp., would take over much of MGM’s production as part of the deal, said the people, who declined to be named because the talks are private, explains Business Week.

Relativity’s offer yesterday represents a new option for Los Angeles-based MGM, which is seeking buyers after falling behind on $3.7 billion in debt. MGM is weighing three other bids to buy or refinance the company, along with Vice Chairman Stephen Cooper’s proposal to refinance the studio and keep it independent, people with knowledge of the bidding have said.

Susie Arons, an outside spokeswoman for closely held MGM, declined to comment. The Web site Deadline Hollywood reported the offer earlier.

Kavanaugh, 35, is seeking MGM’s rights to the James Bond franchise, according to the people. He also wants the studio’s interest in “The Hobbit,” a future film based on the novel by “Lord of the Rings” author J.R.R. Tolkien that MGM shares with Time Warner Inc.’s Warner Brothers, they said.

Cooper, a turnaround specialist brought in last year to restructure MGM, wants to raise $1 billion, including $500 million to produce as many as seven films a year, people familiar with his proposal have said.

Relativity has talked with Moelis & Co., the investment bank MGM hired last May to help restructure its debt, according to the people. Kavanaugh has yet to meet with MGM officials.

Revised Plan

Relativity and Elliott Management Corp., its New York-based hedge fund partner, initially sought to buy MGM in early March, the people said. They dropped out of the bidding on March 17.

Kavanaugh offered to provide film financing a week later when bids came below the $2 billion that MGM’s creditors had sought, the people said.

Time Warner, based in New York, has bid $1.5 billion to acquire MGM, people with knowledge of the auction have said. The private equity fund Qualia Capital, led by film veterans Amir Malin and Ken Schapiro, and billionaire Len Blavatnik’s Access Industries have proposed plans to restructure the company, according to the people.

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