Sony cages MGM lion
2004-09-14 08:24
Los Angeles - A consortium led by Sony has agreed in principle to acquire famed Hollywood studio Metro-Goldwyn-Mayer for nearly $3bn, MGM said.
The deal announced late on Monday likely marks the last chapter in the history of two of Hollywood's most storied names - MGM, once best known for its musical hits like Singing in the Rain and Meet Me in St Louis and its subsidiary, United Artists, the studio founded in 1919 by Charlie Chaplin, Mary Pickford, Douglas Fairbanks and DW Griffith.
The agreement is a coup for Sony, which as late as Sunday was considered the underdog in the bidding to Time Warner, which dropped its offer on Monday.
Acquiring MGM's vast library of more than 4 100 films boosts the content Sony can now offer on DVD and on portable devices, many of which Sony makes.
Sony also announced in a statement that it has reached a distribution deal with Comcast, the nation's largest cable provider, that would allow video on demand and new cable channels featuring Sony and MGM content.
MGM bought United Artists in 1981 and has used the brand in recent years as a boutique studio, releasing low-budget, independent films.
MGM said it received a cash deposit of $150m on Monday from Sony, along with several private equity companies.
MGM said its management will recommend the deal, which it called a "proposed merger", to its board by September 27.
Sony has agreed to pay $12 a share for MGM, or about $2.94bn in cash, a 4% premium over MGM's closing price of $11.55 on Monday on the New York Stock Exchange.
The deal also calls for Sony to assume about $1.9bn in MGM debt.
The sale would mark the third time billionaire investor Kirk Kerkorian has sold the film studio. Through his Tracinda Group, Kerkorian owns 74% of MGM's outstanding shares and the sale to Sony would net him about $2.1bn.
MGM paid a special one-time dividend of $8 a share in May, saying it was the best way to return value to shareholders. That transaction paid Kerkorian about $1.4bn.
For the past two years, MGM has been hunting for ways to grow larger, either through acquisitions or mergers.
The company made an $11.5bn bid for Vivendi Universal Entertainment last year, but lost that contest to NBC.
Sony is expected to shutter MGM's current production, with the possible exception of the James Bond franchises.
But MGM has a considerable library of more than 4 100 titles, including the Pink Panther and Rocky franchises. Analysts have estimated MGM's library will generate $440m in 2004 by exploiting only about a third of its titles on the newer DVD format.
Time Warner had been seen as the front-runner for MGM going into the weekend. But Sony raised its offer, setting off a bidding war that Time Warner concluded it didn't want to engage in.
- AP