1. MGM suitors await second-round invites

    By Devin Zydel on 2010-01-20

    The Hollywood Reporter – Seven companies have placed offers to buy MGM so far, with a nonbinding offer expected soon from Fox.

    Warner Bros., Lionsgate and Elliott Management — an investor in producer Relativity Media — were among those making first-round offers. Bidders will learn next week if they have made it into a second round of bidding.

    All first-round offers, part of a solicitation process launched last month by MGM consultant Moelis & Co., fell short of the $2 billion target for selling the Lion. But with those holding $3.7 billion in MGM debt pressing for a change in ownership, a lesser sum might get the job done.

    First-round offers were allowed only on the entire studio. It’s unclear if a la carte bidding on select MGM assets, or on film rights to the James Bond franchise, will be allowed in the next round.

    Lionsgate is considered likely to file a second-round bid for the entire company. So far, the mini-major has offered $1.5 billion to buy the studio, though a spokesman declined to confirm the move.

    “Let Lionsgate buy MGM and clean it up,” said an exec at a company sitting out the bidding process. “Then, if they get it cheaply, we’ll buy them.”

    None of the first-round offers was particularly well detailed, so the debt holders will be anxious to get a better sense of the seriousness of those placing bids.

    A recent decline in trading levels on MGM’s public debt might reflect a growing pessimism on the price that Moelis can secure for MGM. Lion owners include Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle.

    JPMorgan Chase is leading a steering committee representing the studio’s lenders group, with the committee expected to meet Monday to discuss the situation. The committee will formalize a third debt-forbearance extension, allowing bidding to continue beyond a Jan. 31 deadline on a big interest payment owed by the studio.

    Companies reviewing MGM financial data have included Fox, Warner Bros., Lionsgate, Liberty Media, AT&T, Summit Entertainment, Reliance Big Entertainment and Elliott.

    Fox got started late in its due diligence and by Wednesday had yet to submit a bid. Summit is seeking more info before deciding whether to bid, and RBE decided against making an offer.

    It was unclear whether Liberty or AT&T were in the mix of first-round bidders, but neither has been considered a serious suitor. First-round bidders often include a number of companies drawn by little more than professional curiosity.

    Meanwhile, a source close to Relativity topper Ryan Kavanaugh said that company is closely aligned with Elliott in the bidding process, as execs the New York-based hedge fund await an invitation to the next round of financial review and bidding.

    An Elliott insider said, “All options are on the table.”

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