Does Time Warner need MGM?

MarketWatch – Time Warner wants to help put MGM out of its misery.

Time Warner’s takeover attempt underscores the value of a coveted film library. Does Time Warner need it, though?

MGM possesses a valuable film library, numbering such classics as 12 Angry Men, Birdman of Alcatraz and the James Bond series. But the struggling studio also has a debt load of about $3.7 billion. Is the library worth the debt burden?

AM Report: Google’s China GambleGoogle’s Chinese site has started redirecting search results via Hong Kong, which does not have the same censorship laws that the mainland has, Jason Dean reports from Beijing.
Time Warner has apparently outbid such rivals as Lions Gate Entertainment and billionaire Len Blavatnik’s Access Industries for control of the fabled film company, according to wire-service reports Read AP report.Read Reuters report.

The dollar figures appear to be in the range of $1.2 billion to $1.5 billion.

Time Warner, a huge entertainment and media entity, shows movies regularly on its Home Box Office and other cable-television operations. It could always use more movies to show on its channels.

MGM will take several weeks to assess the quality of the offers.

This is an interesting time in the movie industry. Billionaire investor Carl Icahn is making an unsolicited bid to acquire Lions Gate, which in itself owns an enviable library of assets.

In the past year, News Corp’s Avatar became the biggest-grossing film in history, topping even Titanic. (News Corp. is the parent company of MarketWatch, publisher of this report.)

Perhaps entertainment companies think it is a sound investment to acquire successful properties, such as James Bond. That makes sense. But the risk of amassing all of that debt is a questionable practice.

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Time Warner said to plan $1.5 billion MGM studio bid

BusinessWeek – Time Warner Inc. plans to bid $1.5 billion for the Metro-Goldwyn-Mayer Inc. film studio, according to a person with knowledge of the decision.

The owner of the Warner Bros. movie studio intends to put in the second-round offer today, said the person, who declined to be named because the talks are private. MGM said today it received several bids and will seek additional delays on interest payments.

Bids must be high enough to win over MGM’s creditors, who may restructure the studio’s debt instead. John Malone’s Liberty Media Corp. and hedge fund Elliott Management Corp., working with Relativity Media, decided not to bid, people with knowledge of the situation said March 17.

MGM, distributor of the James Bond films, put itself up for sale last year after failing to make interest payments on $3.7 billion of debt. The Los Angeles-based studio owns a 4,100-film library and has a co-production deal with Warner Bros. for movies based on J.R.R. Tolkien’s novel The Hobbit. The studio was taken private for $5 billion in 2005 by buyers including Providence Equity Partners.

New York-based Time Warner was considering a bid of $1.2 billion to $1.5 billion, with Warner Bros. executives pushing for the higher end of the range, people familiar with the matter said March 18.

Time Warner, which also owns CNN and HBO, rose 4 cents to $31.28 today in New York Stock Exchange composite trading. The shares have gained 7.3 percent this year.

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MGM pushes back deadline on bids

Variety – Beleaguered MGM appears to have pushed back the deadline for binding offers until at least Monday.
The studio had no comment as Friday’s deadline for bids passed. The three most likely bidders—Access Industries, Lionsgate and Time Warner—also had no comment as to whether any of them had submitted offers.

Several people familiar with the situation said MGM had indicated it was extending the deadline.

The assets include rights to the James Bond and Hobbit franchises, a 4,000-title library and the MGM and United Artists logos and current operations. A decline in DVD revenues has led to a decline in expectations as to how much MGM would fetch in the auction.

If bids fall short of expectations or no bids materialize, MGM could attempt a recapitalization through investment bank Qualia Capital through a cash infusion and a debt-to-equity transaction that would allow MGM to remain in business as a stand-alone entity.

Since turnaround specialist Stephen Cooper came on board as chairman, the debt holders have agreed three times to hold off on receiving debt payments, with the most recent extension going to March 31. MGM’s facing repayment of its $250 million revolving credit line in early April and a $1 billion payment on its $3.7 billion debt in July 2011.

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Time Warner still mulling MGM bid as deadline passes

Los Angeles Times – The fate of Metro-Goldwyn-Mayer Inc. is still in limbo.

While bids for the troubled studio were due Friday, front-runner Time Warner Inc. was still mulling an offer late in the afternoon and it was unclear if, and when, the media company was going to bid, according to a person close to the matter. Two knowledgeable people said that if Time Warner, which owns Warner Bros. studio, did make an offer, it was expected to be under $1.5 billion.

It’s possible that MGM has been forced to extend the deadline for final bids as Disney recently did with its Miramax Films unit, which is also up for sale. But as of Friday evening there was no official word and a spokeswoman for MGM didn’t have any comment.

The field of prospective buyers for both studios has dwindled in recent weeks as the valuations being put on the properties came into question. John Malone’s Liberty Media and hedge fund Elliott Associates dropped out of the auction for MGM as Friday’s deadline for binding offers approached; earlier Summit Entertainment and investment firm Qualia Capital bowed out of the running for Miramax.

Other expected to bid for MGM are industrialist Len Blavatnik’s Access Industries and Lions Gate Entertainment, but it couldn’t be determined if they had submitted bids yet. Early Friday morning, Carl Icahn launched a hostile takeover bid for Lions Gate and wants to block the company from buying MGM. Lions Gate had no comment but last week Vice Chairman Michael Burns said in an interview with The Times that, “We never pay retail for any asset.”

It is unclear whether the bids expected to be submitted will be enough to appease MGM’s 150 creditors, who are said to be seeking at least $2 billion. Consequently, many believe the debt holders may call off the sale and opt for a plan to restructure MGM’s $3.7-billion debt and seek new capital—or, as a last recourse, force the company into bankruptcy.

There are at least two alternative plans in the wings, including one from Twentieth-Century Fox parent News Corp. and another from Qualia Capital, a media investment fund run by Amir Malin and Ken Schapiro.

For several weeks, prospective buyers have been privately complaining they’ve been unable to get detailed financial information from MGM. Several suitors said that the more data they get, the more grim MGM’s prospects appear. They say that current cash flow from the studio’s film library of about 4,000 titles is no more than $250 million—about half of what it was a few years ago—with future projections declining.

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MGM awaits new partner

Variety – MGM’s murky future should come into sharper focus today, two days after the struggling studio mounted what may be its last hurrah with the preem of Hot Tub Time Machine.

With binding offers due today, MGM’s St. Patrick’s Day screening at the Hollywood ArcLight and the after-party at the Cabana Club could wind up being the Lion’s final public outing as a stand-alone studio. It was the first MGM premiere since September when Fame preemed at the Grove and only the second since late 2008, when Valkyrie screened at DGA headquarters. And Tub, which opens March 26, will be the last MGM pic to launch until The Zookeeper opens Oct. 8.

Wednesday’s event unveiling the $45 million comedy was a light-hearted affair with little chatter among the hundreds of guests about the ultimate fate of MGM, which put itself up for sale four months ago. Studio president Mary Parent and VPs Cale Boyter and Luke Ryan mingled along with Stephen Cooper, the corporate turnaround specialist who came on board as Lion chairman last summer.

Debt-laden MGM invited a half-dozen suitors last month to participate in a second round of bidding, which included allowing those that qualified to pore over MGM’s internal financials. Though no one has announced a formal bid, the most likely candidates are Time Warner, Lionsgate and Len Blavatnik’s Access Industries.

People close to the situation believe Access has indicated it is willing to make an offer of as much as $2 billion. Lionsgate’s offer is pegged in a range between $1.4 billion and $1.8 billion while Time Warner’s offer is expected to be in the $1.5 billion range. Potential bids by John Malone’s Liberty Media and Ryan Kavanaugh’s Relativity Media with hedge fund Elliott Management aren’t expected to materialize.

Each bid contains unique challenges. Access would establish itself as a showbiz player but would likely sell off MGM’s rights to the James Bond and Hobbit franchises. Time Warner, sitting on a wad of $5 billion in cash from the recent spinoff of its cable systems, would be able to fully exploit Bond and Hobbit (which it is already co-producing through New Line) but probably has little use for the 4,000-title library. Lionsgate, which has historically grown partly through library acquisitions, isn’t set up to do tentpoles such as the Bond movies and would likely seek a partner or sell off the franchises.

The submission of binding bids means that MGM will meet within the next week or so with its debtholders to sort out what to do next. Possibilities include picking one of the offers, starting a third round of bidding or going the route of recapitalizing. A recapitalization bid could bring investment bank Qualia Capital or News Corp. into the picture.

Qualia, operated by former Artisan exec Ken Shapiro and Amir Malin, is believed to have proposed a combination of a cash infusion and a debt-to-equity transaction that would allow MGM to remain in business with its existing management. The Lion has said that one of its options for dealing with its crushing $3.7 billion debt load is to find a partner or remain a stand-alone entity.

It’s uncertain if the numbers being bandied about as the price for MGM assets—which include MGM and United Artists names and logos and MGM’s TV operations—will be high enough to meet expectations of the 140 MGM debt holders. And since MGM’s privately held, there’s no specific sale deadline as long as the debt holders go along.

Since Cooper came on board, the debt holders have agreed three times to extend the debt payments, with the most recent extension going to March 31. MGM’s facing repayment of its $250 million revolving credit line in early April and a $1 billion payment on its $3.7 billion debt in July 2011.

The only pics in Leo’s pipeline after Hot Tub Time Machine and The Zookeeper are a Red Dawn remake in November and a 3D Cabin the Woods in January.

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Time Warner said to be considering bid for MGM studio

BusinessWeek – Time Warner Inc. is considering a bid of $1.2 billion to $1.5 billion for the Metro-Goldwyn-Mayer Inc. film studio, according to two people with knowledge of the discussions, as second-round offers come due tomorrow.

Warner Bros. executives, including Chief Executive Officer Barry Meyer and Chief Operating Officer Alan Horn, will iron out a possible price tomorrow with Time Warner CEO Jeff Bewkes, said one of the people, who declined to be named because the talks are private. Time Warner may decide not to make an offer, the people said.

An offer at that price may not be enough to win over MGM’s creditors, who have allowed the studio to delay making payments on about $3.7 billion in debt until March 31, said David Bank, an analyst at RBC Capital Markets in New York. Time Warner is among a dwindling number of prospective buyers after John Malone’s Liberty Media Corp. and hedge fund Elliott Management Corp., working with Relativity Media, decided not to bid, people with knowledge of the bidding said yesterday.

“At those kinds of levels, the bondholders are probably going to look at a restructuring,” said Bank, who rates Time Warner shares “outperform.” “That’s not an objectionable price for Time Warner shareholders to be looking at, but it’s definitely not what the debt holders were looking for.”

Executives at the Warner Bros. film studio are pushing for an offer at the higher end of the range, the people said.

Keith Cocozza, a spokesman for New York-based Time Warner, declined to comment, as did Susie Arons, an outside spokeswoman for Los Angeles-based MGM.

‘Not Good Enough’

If bids come in below $2 billion, there’s a realistic possibility creditors will say, “‘Sorry, not good enough,’ and decide to kick this can a little further down the road,” said Roger Smith, executive editor of Global Media Intelligence. He’s the former finance chief of Carolco Pictures and former head of strategic planning for Warner Communications, now Time Warner.

Time Warner, the parent company of Warner Bros., fell 4 cents to $31.16 at 4 p.m. in New York Stock Exchange composite trading. The shares have gained 6.9 percent this year.

MGM’s value fell below a price Engelwood, Colorado-based Liberty Media thought would be acceptable to MGM’s creditors, two people said yesterday.

MGM’s $3.7 billion term loan dropped to as low as about 50.75 cents on the dollar today and then rebounded to about 51.25 cents, according to two people familiar with the trades, who declined to be identified because the transactions are private. The loan finished trading yesterday at about 54 cents.

Also exploring a second-round bid are billionaire Len Blavatnik’s Access Industries and Lions Gate Entertainment Corp., people close to the process said last month.

Alternative to Bid

As an alternative to the bidders, News Corp., parent of Twentieth Century Fox, and Qualia Capital LLC, led by Amir Malin and Ken Schapiro, have each proposed restructuring MGM’s debt and injecting cash to recapitalize the company, people with knowledge of the process said in January.

MGM, distributor of the James Bond movies, was taken private for $5 billion by buyers including Providence Equity Partners in 2005. It owns a film library with 4,100 titles and has a co-production deal with Warner Bros. on the planned film The Hobbit, based on the J.R.R. Tolkien novel.

“The risk comes in making some assumptions about what the future of home entertainment looks like and what the future stream of cash flow out of the library might be,” said Chris Marangi, an analyst with Rye, New York-based Gabelli & Co.

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Liberty Media, Elliott said to drop from MGM bidding

Business Week – John Malone’s Liberty Media Corp. and hedge fund Elliott Management Corp. have decided not to bid for the Metro-Goldwyn-Mayer Inc. movie studio, according to people with knowledge of the bidding.

MGM’s value fell below a price Liberty executives believed would be acceptable to the Los Angeles-based studio’s creditors, said two people with knowledge of the Englewood, Colorado-based media company’s plans. New York-based Elliott, working with producer Ryan Kavanaugh’s Relativity Media, also pulled out, said two people, who sought anonymity because talks are private.

The thinning field of potential buyers lessens the chance of a bidding war for the studio, which stopped making payments on $3.7 billion in debt and put itself up for sale last year. Others exploring a second-round bid included billionaire Len Blavatnik’s Access Industries, Time Warner Inc. and Lions Gate Entertainment Corp., people close to the process said on Feb. 3.

Metro-Goldwyn-Mayer has set a March 19 deadline for formal offers.

Courtnee Ulrich, a spokeswoman for Liberty, declined to comment. Scott Tagliarino, a spokesman for Elliott, declined to comment. Mara Buxbaum, a spokeswoman for Los Angeles-based Relativity, didn’t immediately respond to an e-mailed query.

Metro-Goldwyn-Mayer’s $3.7 billion term loan was priced at 54 cents on the dollar today, down from about 55.5 cents early yesterday, according to two people familiar with the market who declined to be identified because the trading is private.

Recovery Value

The trades imply a recovery value of $2 billion, down from $2.41 billion on Jan. 4, when the loan traded at 65.25 cents.

In 2003, Malone withdrew from bidding for Vivendi Universal’s Los Angeles-based operations, including the film studio and theme park. Liberty, owner of the Starz Entertainment pay television service, is evaluating options for its three-year old movie-production unit, Overture Films.

Liberty’s Starz tracking stock dropped 28 cents to $51.81 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have gained 12 percent this year. Liberty Capital rose 60 cents, or 1.8 percent, to $34.85 and is up 46 percent this year.

TheWrap.com reported the departure of Elliott and Relativity earlier.

In addition to the bidders, News Corp., parent of Twentieth Century Fox, and Qualia Capital LLC, led by Amir Malin and Ken Schapiro, have each proposed restructuring Metro-Goldwyn-Mayer’s debt and injecting cash to recapitalize the company, people with knowledge of the process said in January.

New York-based Qualia’s proposal would involve a $500 million cash infusion to fund operations, and the conversion of some debt to equity, one person said then.

Library, ‘Bond’

MGM, created in 1924, owns a film library with 4,100 titles, and controls rights to the James Bond franchise. It released one picture in 2009 and has a co-production deal with Warner Bros. on the planned film The Hobbit, based on the J.R.R. Tolkien novel. Hot Tub Time Machine is set for release on March 26.

Sony Corp., which co-produced and distributed the two most recent Bond films, is interested in distributing future ones or becoming a production partner to MGM or its new owners once a sale is completed, Sony Pictures Entertainment Chairman and Chief Executive Officer Michael Lynton said this week.

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Pinewood Studios launches film restoration facility

Pinewood’s media preservation, restoration and archive facility open for business

Pinewood Studios has launched its Media Preservation, Restoration and Archive facility with a reception attended by key industry figures from companies including Optimum Releasing, Canal+, Disney, Getty Images, and Warner Bros and the BBC.

Located in Pinewood’s Picture Post Production suite, the new facilities will provide restoration services for still and moving images.

Pinewood announced a deal last year with Optimum Releasing and Canal+ relating to the Canal+ British Library Archive which comprises some 1,400 classic British films including early Hitchcock, The Third Man, The Ladykillers, The Dambusters and many other titles from iconic names like Ealing, Carry On and Hammer.

As part of the deal, Pinewood will provide a large amount of the film and audio preservation and restoration services for the film archive, which has been based at Pinewood Studios for the past twenty years.

Pinewood will start with restorations of three classic titles—Michael Powell’s Peeping Tom, Robert Hamer’s Kind Hearts and Coronets and Lionel Jeffries’ The Railway Children, each of which will be subsequently re-released theatrically and made available in Bluray/DVD. Pinewood will also complete the planned digitisation of the Canal+ Image UK Ltd stills archive.

Working in conjunction with Optimum Releasing and Canal+, Pinewood Post Production will provide managed, secure temperature and humidity controlled storage for the Canal+ Image UK library assets and has constructed two new, state of the art cold storage facilities to manage this process.

Speaking at the launch, Giles Farley, co-Managing Director of Pinewood Group Post Production said: “We are delighted to have offically opened the new facilities and are immensely pleased to have been joined by so many colleagues from across the film and television industry. Everyone present here today shares our passion for preserving iconic and historical film titles and still images. We are especially proud that our new state of the art facilities allow us to work with Canal+ to restore many classic British titles.”

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Len Blavatnik eyes a starring role for MGM in his media empire

Financial Times – Len Blavatnik, the entrepreneur, has signalled his intention to combine his media investments with Metro-Goldwyn-Mayer, the Hollywood studio being sold by its lenders.

Mr Blavatnik, who owns Access Industries, the US-based industrial group, told the Financial Times the studio “could be a good platform to expand our current assets . . . At the right price, it’s a great property.”

The studio, which produced Gone with the Wind and The Wizard of Oz, has fallen on hard times since being acquired in 2005 by a Sony-led consortium for $5bn (£3.3bn).

Initial bids for MGM have been low, and the sale is not expected to attract offers much higher than $1.5bn when final bids are made on Friday.

The value of its film library, the largest in Hollywood, has been hit by falling DVD sales, while plans to re-establish the studio as a production force ran aground when it failed to raise sufficient funds to make a slate of new titles.

But the studio remains attractive to buyers. It owns the James Bond catalogue and has the right to make future Bond films. It is developing a film version of The Hobbit.

Mr Blavatnik faces competition from Time Warner, which is flush with cash after spinning off its cable business, and Relativity Media, the production and finance group backed by Elliott Associates, the hedge fund.

Mr Blavatnik said he wanted to build a “media platform for the 21st century”.

His other media investments include a controlling stake in Top-Up TV, the UK media group, and a stake in Warner Music. He acquired the UK operations of Icon, Mel Gibson’s film company.

Revenues from media were “minuscule” compared with the rest of the Access portfolio, Mr Blavatnik said. “But in three to five years I would like to have more media and telecom assets than I do now, particularly in digital.”

Access owns Lyondell-Basell Industries, the chemicals company seeking to emerge from bankruptcy, as well as stakes in TNK-BP, the oil group, and UC Rusal, the aluminium producer controlled by Oleg Deripaska.

Mr Blavatnik is aware of the industry’s reputation for parting new investors from their money.

“It concerns me very much . . . I don’t want to be the next victim,” he said.

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Sagging sales may drive down MGM bids

The Hollywood Repoter – Going, going … bankrupt?

MGM has a March 19 deadline for solicitation of bids for the Lion and its 4,000-title film library, but the latest round of due diligence is tugging down estimates of the studio’s worth. Six companies were invited to make firm offers after a previous nonbinding round of bids failed to top $2 billion.

One big problem: Annual revenue from exploiting catalog titles for global television once exceeded $500 million but has fallen to $350 million. That’s got some predicting perceived front-runner Time Warner will bid much closer to $1 billion than the minimum $1.7 billion likely needed to persuade holders of $3.7 billion in MGM debt to sign off on a sale.

If bids come in too low, the Century City studio would have to ask lenders for a fourth extension of the deadline for a big interest payment. The current debt forbearance agreement ends March 31.

MGM also would have to seek an extension of the April 8 deadline on a $250 million principal payment that comes due once its revolving credit facility expires.

If lenders balk at either extension—and their mood grows surlier by the day—the only place the Moelis-led effort to bail out MGM’s owners will be headed is to bankruptcy court. Then it would be only a matter of time before the, uh, lion’s share of studio equity passes from the current consortium to lenders.

A proposed outright sale would have to approved by lenders unanimously; a prepackaged bankruptcy would need two-thirds approval. MGM’s debt had been held among more than 140 lenders, though recent consolidation of their ranks has lowered the number a bit.

MGM’s owners include Providence Equity, TPG Capital, Sony, Comcast, DLJ Merchant and Quadrangle. Those invited to a second round of bidding include Time Warner, Lionsgate, Liberty Media, Summit Entertainment, Access Industries and Elliott Management.

MGM chief Stephen Cooper, brought in to replace former CEO Harry Sloan, is a turnaround specialist whose preference all along has been a debt restructuring rather than an outright sale of the studio. A prepackaged bankruptcy would amount to a restructuring, but there is the related question of studio management.

Cooper, who draws a six-figure monthly paycheck, could be replaced if the restructuring comes with a cash infusion by a new equity partner. That’s most likely if the capital comes from an investor with a seasoned film team.

Lionsgate, Access, Spyglass and Qualia are among companies that could be tapped for more limited MGM investments, if bidding for the entire studio comes up short. Access, a diversified conglomerate controlled by industrialist Len Blavatnik, might be the bidder most likely to keep current management.

MGM’s valuation problem stems from its aging library. The studio hasn’t had a release in months, though it’s set to unspool “Hot Tub Time Machine” on March 26.

Current owners mothballed production until a couple of years ago, so the studio’s DVD revenue has been declining. More recently, the dust on the catalog has begun to undermine MGM’s once-robust international TV licensing biz.

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