Bloomberg – Billionaire Len Blavatnik is among the second-round suitors for Metro-Goldwyn-Mayer Inc., distributor of the James Bond movies, two people with knowledge of the situation said.
Lions Gate Entertainment Corp., Time Warner Inc., Liberty Media Corp. and Elliott Management Corp., working with Hollywood financier Ryan Kavanaugh, also are in the bidding, according to people close to the process who sought anonymity because discussions are private. They declined to discuss amounts proposed in the non-binding first round.
Advancing to the second round gives suitors access to more detailed information before making a formal bid for the Los Angeles-based studio, which owns a 4,100-film library and is exploring a sale after failing to make payments on $3.7 billion of debt. Last week, lenders extended a moratorium on interest payments to March 31, allowing more time for negotiations.
“The price has come down so far that it’s attracting non-studio bidders,” said David Davis, managing partner at the entertainment advisory firm Arpeggio Partners in Santa Monica, California.
Matthew Harrigan, an analyst with Wunderlich Securities, estimated last month the company is worth $1.6 billion to $1.7 billion. When the studio put itself up for sale in November, MGM creditors sought at least $2 billion, people with knowledge of the situation said then.
Tough to Compete
Blavatnik may be at a disadvantage because he doesn’t own a film distribution business, Davis said in an interview. Studio bidders would likely plan to close MGM’s distribution unit to reduce costs, he said.
“I don’t see how companies that don’t own motion-picture distribution systems can compete on bidding,” he said. “You have big overhead savings.”
Blavatnik’s bid marks an effort by the Ukrainian-born industrialist to expand in the U.S. Blavatnik, a U.S. citizen, is chairman of New York-based Access Industries Holdings LLC, which owns a stake in Top Up TV, a U.K. pay television service, and in 2008 acquired control of the U.K. arm of actor/director Mel Gibson’s Icon Productions Inc., the U.K.’s Daily Telegraph reported at the time.
A spokesman for Blavatnik declined to comment, as did Susie Arons, an outside spokeswoman for MGM. Ed Adler, with New York-based Time Warner, and Courtnee Ulrich of Liberty Media also wouldn’t comment.
The Wall Street Journal reported today that Time Warner offered less than $2 billion in cash for MGM, citing people familiar with the matter.
In addition to those bidders, News Corp., parent of Twentieth Century Fox, and Qualia Capital LLC, led by Amir Malin and Ken Schapiro, have each proposed restructuring the debt and injecting cash to recapitalize the company, people with knowledge of the process said last week. Both companies are based in New York.
News Corp. is unlikely to win the bidding because others are more interested, Chairman and Chief Executive Officer Rupert Murdoch said on a conference call yesterday.
MGM will probably seek a so-called pre-packaged bankruptcy to complete a sale, said Clark Hallren, managing director at the Los Angeles-based entertainment advisory firm Clear Scope Partners. The move would eliminate the need for MGM’s owners to get approval from each of the company’s 140 creditors, he said.
“You’ve got to have a bankruptcy as a matter of process,” said Hallren, who worked for 23 years in JPMorgan Chase & Co.’s entertainment banking division. “There’s no way you’re going to get 140 people to agree to anything.”
Lions Gate is talking with One Equity Partners, a private equity investment arm of JPMorgan Chase, about becoming a partner in its bid, according to a person with knowledge of the talks. In May 2008, Lions Gate agreed to sell a 49 percent stake in its TV Guide Network to One Equity for $123 million.
Tasha Pelio, a spokeswoman for New York-based JPMorgan, declined to comment on any role the bank may have in the MGM deal. Peter Wilkes, a Lions Gate spokesman, wouldn’t comment on MGM or JPMorgan.
Blavatnik, 52, was ranked 44th on Forbes magazine’s 2009 list of the 400 richest Americans with a $5 billion fortune made in oil and gas. He emigrated to the U.S. from the former Soviet Union in 1978 and studied at Columbia University and Harvard Business School before founding Access Industries in 1986, according to the magazine.
In June, Blavatnik offered $33 million in an unsuccessful bid for a stake in Irish broadcaster Setanta Sports, BBC News reported at the time.
MGM Vice-Chairman Stephen F. Cooper, who is leading the studio’s restructuring, also serves as supervisory board vice chairman and head of the restructuring committee at LyondellBasell Industries, partly owned by Blavatnik’s Access Industries. The company’s U.S. operation, Lyondell Chemical Co., filed for bankruptcy protection in January 2009.
With backing from New York-based Elliott Management, Kavanaugh, 35, finances movies for Sony Corp. and NBC Universal’s Universal Pictures and produces films through his Relativity Media LLC, based in West Hollywood, California. Relativity Media and Elliott Management declined to comment, according to Scott Tagliarino, a spokesman for both.
Relativity has helped finance movies including Fast and Furious, Hancock and Mamma Mia! according to a July 2009 statement from the company.
MGM, created in 1924, made films including The Wizard of Oz” and Ben Hur. The company sold many of its early pictures prior to its 2005 buyout by a group led by private equity firms Providence Equity Partners and TPG. It released one picture in 2009 and has a co-production deal with Warner Bros. on the planned film The Hobbit.
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