MGM Postpones Meeting, Sale Talks Heat Up
The New York Times
May 6, 2004
Metro-Goldwyn-Mayer Inc. said yesterday that it was postponing its annual meeting to June 29 from next Wednesday because it was “considering strategic alternatives.”
MGM is in discussions about a sale to a group that includes the Sony Corporation and two private equity firms, the Texas Pacific Group and Providence Equity Partners, for about $5 billion.
MGM declined to comment, but people close to the discussions said that Sony and the equity firms were near an agreement for exclusive rights to review the company’s books.
That agreement, if concluded, would expire in about two weeks.
Should the negotiations lead to a sale, the terms could possibly be worked out by the June 29 meeting.
Still, MGM’s agreement with Sony would not preclude other bidders from making an offer. No other serious buyers, however, appear close to making a bid, though Time Warner and General Electric, through its NBC division, are said to be considering offers.
The Sony-led alliance has been described as delicate because the private equity firms would put up most of the financing, but Sony would effectively have management control of the company.
That would not involve the uncertainties of running a movie company because Sony intends to shut the film production operation and simply use the MGM library as a source of cash flow.
MGM’s stock has jumped since it was reported in April that the controlling shareholder, Kirk Kerkorian, might be close to completing a sale.
Shares of MGM rose 9 cents yesterday, to $21.02.
While MGM has held talks with numerous suitors over the years, the talks with Sony appear to have gained more traction than others. Indeed, MGM’s public statement yesterday about the possibility of an agreement seemed to provide a sense of seriousness to the talks and to put pressure on the company to reach a deal.
The talks come as MGM’s chief executive, Alex Yemenidjian, has turned around the business, which only five years ago was losing money. He reversed that trend and turned the business into a cash cow by focusing much of the company’s efforts on generating profits from its 4,000-title library of films and paring its movie productions to focus on only its most profitable and less risky franchise films, like the James Bond series.
Still, the bidding team has had tenuous relationships with one another and negotiations with Mr. Kerkorian are not easy either.
By GERALDINE FABRIKANT and ANDREW ROSS SORKIN
The New York Times