Time Warner offers $3 billion for MGM

[The Storyteller]

Associated Press
Update 2: Sony-Led Group to Buy MGM in $5B Deal
09.23.2004, 09:36 PM

A consortium led by Sony Corp. that includes cable television giant Comcast Corp. has entered into a definitive agreement to acquire venerable film studio Metro-Goldyn-Mayer, the parties said Thursday.

The Sony-led group will pay $12 per share for MGM, or about $2.94 billion in cash, and assume about $2 billion in debt for a deal valued at nearly $5 billion.

MGM will continue to operate as a separate, private company based in Los Angeles after the deal closes next year, with Sony Pictures distributing MGM's films and television shows as well as MGM's valuable library of more than 4,000 films, the companies said.

Philadelphia-based Comcast, which had earlier agreed to a distribution deal with Sony, now becomes a part-owner of MGM. Comcast will use Sony Pictures' and MGM's vast catalog of films and TV programs to feed its nascent video-on-demand service. Comcast and Sony have also agreed to a joint venture to create new cable channels.

The parties had agreed in principle to the deal earlier this month. The acquisition must still be approved by MGM's shareholders and regulatory agencies.

The deal marks a significant victory for the Sony-led group, which had been seen as the underdog in the bidding to Time Warner Inc. Sony started discussions with MGM in April, while Time Warner joined later this summer.

Last week, Sony raised its offer after securing the distribution deal with Comcast, setting off a bidding war that Time Warner abandoned.

Private investment firm Providence Equity Partners is putting up most of the cash, $525 million, followed by Texas Pacific Group with $350 million.

Sony and Comcast will each invest $300 million. DLJ Merchant Banking Partners will invest $125 million.

JP Morgan Chase will lead a banking syndicate to provide up to $4.25 billion in senior debt financing along with Credit Suisse First Boston.

"We all look forward to preserving and enhancing the legendary franchise that is MGM, and to ensuring that its extraordinary content continues to be enjoyed by people around the world," Howard Stringer, Sony Corp. of America chairman and CEO, said in a statement.

Until the deal closes, MGM will continue to fund and produce a full slate of films, including next year a new James Bond feature and a new "Pink Panther" movie starring Steve Martin.

After the deal closes, Sony will co-finance and produce films with MGM.

It was unclear what will happen to MGM's senior management, including Chairman Alex Yemenidjian and Chris McGurk, vice chairman and chief operating officer.

A Sony spokesman said it was too early to make such decisions.

Upon approval of the deal, MGM employees would be given the chance to apply for available positions, the companies said Thursday.

The sale would mark the third time billionaire investor Kirk Kerkorian has sold the film studio. Through his Tracinda Group, Kerkorian owns 74 percent of MGM's outstanding shares and the sale to Sony would net him about $2.1 billion.

For the past two years, MGM has been hunting ways to grow larger, either through acquisitions or mergers.

*Note:Thoses rumors about shuting down all productions, except James Bond is not true, actually MGM will more than likely be turned into a Art House production company, like SONY Pictures Classics. But all films under production will be finished, but there relese dates may change so not to complete with there new parent company, SONY! TimeWarner was the one who wanted to shut the studio down, SONY even said: "MGM will be a independent company from SONY, but we will own it."

 

[BoyRaisin2]

Well that's good to hear. Not that I watch any MGM movies, but it's good that the brand (and logo) will survive. I wish Warner Bros. did that with Hanna-Barbera.

 

[The Storyteller]

MGM Majority Holders Seen Approving Deal
09.24.04, 10:54 AM ET


Tear Sheet | Chart | News



Standard & Poor's Equity Research reiterated a "hold" on Metro-Goldwyn-Mayer (nyse: MGM - news - people ) after a consortium led by Sony (nyse: SNE - news - people ) reached a definite agreement to acquire MGM for $12 per share in cash. MGM's board has already approved and S&P Equity Research expects majority shareholders voting in favor of the deal, set to close in mid-2005, subject to regulatory approval. Consortium members affirmed a programming and distribution agreement, which will allow for the distribution of Sony Pictures and MGM content on a video-on-demand platform by Comcast (nasdaq: CMCSA - news - people ), and for the creation of a joint venture, to be managed by Comcast, establishing new cable channels featuring Sony Pictures and MGM content. Until the deal closes, MGM will execute its current business plan. S&P Equity Research rates Sony at "buy" and rates both Comcast class A and class A special shares at "hold."

 

[McFraggle]

Well that's good to hear. Not that I watch any MGM movies, but it's good that the brand (and logo) will survive. I wish Warner Bros. did that with Hanna-Barbera.

I agree as well. That's good to hear.

 

[The Storyteller]

The MGM name and everything will still be on everything MGM does, except on Home Entertainment in markets such as Japan, and several other areas that MGM does not own Home Entertainment Distrabution(Spelling?) rights, which is why 20th Century Fox was hired by MGM in 2002 to distribute MGM home entertainment in Japan. In 2007 when MGM's distrabution(Spelling?) deal with FOX in Japan ends SONY's Columbia TriStar Home Entertainment will takeover operations in Japan.
This December all the films of MGM that Warner Bros. owns will be back at MGM, such classics as Gone With The Wind and Wizard of OZ will be back in the hands of MGM, Warner Bros. owns the rights to this films untill Dec. 2004.

 

[McFraggle]

The MGM name and everything will still be on everything MGM does, except on Home Entertainment in markets such as Japan, and several other areas that MGM does not own Home Entertainment Distrabution(Spelling?) rights, which is why 20th Century Fox was hired by MGM in 2002 to distribute MGM home entertainment in Japan. In 2007 when MGM's distrabution(Spelling?) deal with FOX in Japan ends SONY's Columbia TriStar Home Entertainment will takeover operations in Japan.
This December all the films of MGM that Warner Bros. owns will be back at MGM, such classics as Gone With The Wind and Wizard of OZ will be back in the hands of MGM, Warner Bros. owns the rights to this films untill Dec. 2004.

Those films revert back to MGM in December?

 

[The Storyteller]

Here's what happend to MGM, and why Gone With The Wind and Wizard of OZ are now owned by Warner Bros.
In 1980 MGM purchased United Artist, witich had several million dollers in debt, and MGM had alot of debt it self. In 1986 Turner Broadcasting purchased MGM/UA for around $1.4 Billion. MGM/UA had so much debt that Ted Turner had to sell off 50% of TURNER to Time inc.(In 1996 Time Inc., then a part of TimeWarner decided to go ahead a merger with TURNER. Ted Turner hates Kirk Kerkorian to this day for Over priceing MGM, and having to sell half of Turner Broadcasting.) TURNER kept ownership of MGM for about two months, TURNER sold off the MGM Production Studio in Culver City, then sold all of the MGM trademarks:Leo the Lion, MGM symbol, UA, James Bond(50% ownership of James Bond trademark) to Kirk Kerkorian(The Billionaire that owned MGM about three times!). TURNER kept all MGM films made between 1924-1986. Such classic as 2001:A Space Odyssey, Gone With The Wind, Goodbye Mr. Chips, Etc., But TURNER didn't keep the UA films though. MGM restarted making new films, then in 1990 Kirk sold the studio to Pathe' Communications, Pathe' sold Home Video rights to films to over a 100 different companys, in 2003 MGM got most of the those home video rights back. Pathe' got into some trouble, and MGM finally got into the hands Credit Lyone, and in 1996 MGM was sold back to Kirk. In 1997 MGM purchased ORION Pictures from Metromedia. Also that year MGM went public on the NYSE. In Dec. 2003 MGM was in talks to sell to TimeWarner, butthey dissolved. And in Sep. 2004 MGM agreed to be purchased by SONY Corp. and Comcast Corp. for $5 Billion. The story of MGM is like a good movie.

 

[McFraggle]

The story of MGM is like a good movie.

Indeed.

 

[The Storyteller]

MGM Life He Says Sale Wasn't Goal for Him Or Boss
Andrew Ross Sorkin The New York Times, 09.28.04, 1:40 PM ET

Alex Yemenidjian, the chairman and chief executive of Metro- Goldwyn-Mayer, was sitting at his private pool outside his high- roller villa at the Bellagio Hotel and Casino here recently.

He had just struck a $5 billion deal to sell MGM, the Hollywood studio famous for its roaring-lion mascot and film franchises including James Bond, to Sony and a group of investors after an agonizingly long auction.

But he was not interested in talking about the deal. He wanted to discuss why he never wanted to sell the company and why his boss, the elusive billionaire Kirk Kerkorian, who controlled MGM and who has now bought and sold the studio three times since 1969, did not especially want to give it up, either.

"There is a perception out there that Kirk is a seller if somebody gives him a good price," said Yemenidjian, cutting a Bond- like figure in a double-breasted blue blazer with a yellow silk handkerchief protruding from the breast pocket. "That isn't true. I think it bothers him that Hollywood thinks that he treated MGM as an investment toy. Not one time did either Kirk or the board tell me, 'I want you to clean this company up and prepare it for sale.' Not once."

Yemenidjian, 48, has been dogged by his reputation as MGM's flipper-in-chief ever since Kerkorian installed him as its boss in 1999. Back then, the company was beaten and battered, written off as a has-been, a debt-laden stepchild of the studio that once produced films like "Gone With the Wind" and "The Wizard of Oz." And when Yemenidjian arrived on the scene, he was a virtual unknown in Hollywood. If anything, he was considered Kerkorian's henchman, an accountant experienced in making deals, not movies.

Yet within five and a half years, Yemenidjian turned around the business by drastically scaling back productions, scoring a few unexpected hits like the comedy "Barbershop" and the documentary "Bowling for Columbine," and by milking its library of more than 4,000 films.

He won respect on Wall Street, if not fans among the Hollywood elite. Then he performed the final scene of the script that had been written by critics the day he arrived: He sold the studio. In doing so, he made a bundle for Kerkorian who banked at least $2 billion as well as a small fortune for the company's minority shareholders.

"Bringing an outsider's viewpoint to Hollywood may not have necessarily endeared him to the agents, movie stars and the rest of the quote-unquote Hollywood community," said Jack Liebau, the principal at Liebau Asset Management, one of MGM's largest minority shareholders. "But from a shareholder's standpoint, he's exactly what you'd want in the CEO of a publicly held company."

But as Yemenidjian leaned back in his faux 17th-century Tuscan chair, he said he still wished he could have ordered a rewrite and made his own blockbuster acquisitions instead of selling.

"We tried to acquire other companies and they weren't available," he said in a rare interview.

He listed targets that he said he had pursued vigorously: Vivendi Universal, Sony Pictures, Paramount Pictures.

"There was nothing left to buy," he said with a shrug. "There was no place for us to go."

How Yemenidjian, who, like Kerkorian, is of Armenian descent, became Kerkorian's top lieutenant, to run the last independent studio in Hollywood and to sell it in a heated auction between Time Warner and Sony could be its own dramatic release. There is even a potential sequel: for all the sniping in the industry, Yemenidjian is being talked of as a possible successor to Michael Eisner, who will step down as chief executive of Walt Disney in 2006.

Yemenidjian was born in Argentina; his father was a shoemaker who had fled Armenia. The family moved to Los Angeles when Alex was 13.

Yemenidjian graduated from California State University at Northridge in 1977 and founded his own accounting firm. In 1989, Yemenidjian went to a lunch that would change his life. A mutual friend of his and Kerkorian's, George Mason, a managing director of Bear Stearns, planned for them to meet.

Two days later, he recounted, "Kirk asked me if I would take a leave of absence from my firm for six months to work on a special project."

Yemenidjian continued: "He never told me what the project was and I never asked. When I showed up on January 1, 1990, I found out the project was selling MGM."

Kerkorian, 87, who has not given an interview to the news media in decades, said through a spokeswoman, "Alex is one of the most accomplished CEOs I have worked with, and I am very happy with what he and his team have achieved at MGM."

 

[McFraggle]

MGM Life He Says Sale Wasn't Goal for Him Or Boss
Andrew Ross Sorkin The New York Times, 09.28.04, 1:40 PM ET

Alex Yemenidjian, the chairman and chief executive of Metro- Goldwyn-Mayer, was sitting at his private pool outside his high- roller villa at the Bellagio Hotel and Casino here recently.

He had just struck a $5 billion deal to sell MGM, the Hollywood studio famous for its roaring-lion mascot and film franchises including James Bond, to Sony and a group of investors after an agonizingly long auction.

But he was not interested in talking about the deal. He wanted to discuss why he never wanted to sell the company and why his boss, the elusive billionaire Kirk Kerkorian, who controlled MGM and who has now bought and sold the studio three times since 1969, did not especially want to give it up, either.

"There is a perception out there that Kirk is a seller if somebody gives him a good price," said Yemenidjian, cutting a Bond- like figure in a double-breasted blue blazer with a yellow silk handkerchief protruding from the breast pocket. "That isn't true. I think it bothers him that Hollywood thinks that he treated MGM as an investment toy. Not one time did either Kirk or the board tell me, 'I want you to clean this company up and prepare it for sale.' Not once."

Yemenidjian, 48, has been dogged by his reputation as MGM's flipper-in-chief ever since Kerkorian installed him as its boss in 1999. Back then, the company was beaten and battered, written off as a has-been, a debt-laden stepchild of the studio that once produced films like "Gone With the Wind" and "The Wizard of Oz." And when Yemenidjian arrived on the scene, he was a virtual unknown in Hollywood. If anything, he was considered Kerkorian's henchman, an accountant experienced in making deals, not movies.

Yet within five and a half years, Yemenidjian turned around the business by drastically scaling back productions, scoring a few unexpected hits like the comedy "Barbershop" and the documentary "Bowling for Columbine," and by milking its library of more than 4,000 films.

He won respect on Wall Street, if not fans among the Hollywood elite. Then he performed the final scene of the script that had been written by critics the day he arrived: He sold the studio. In doing so, he made a bundle for Kerkorian who banked at least $2 billion as well as a small fortune for the company's minority shareholders.

"Bringing an outsider's viewpoint to Hollywood may not have necessarily endeared him to the agents, movie stars and the rest of the quote-unquote Hollywood community," said Jack Liebau, the principal at Liebau Asset Management, one of MGM's largest minority shareholders. "But from a shareholder's standpoint, he's exactly what you'd want in the CEO of a publicly held company."

But as Yemenidjian leaned back in his faux 17th-century Tuscan chair, he said he still wished he could have ordered a rewrite and made his own blockbuster acquisitions instead of selling.

"We tried to acquire other companies and they weren't available," he said in a rare interview.

He listed targets that he said he had pursued vigorously: Vivendi Universal, Sony Pictures, Paramount Pictures.

"There was nothing left to buy," he said with a shrug. "There was no place for us to go."

How Yemenidjian, who, like Kerkorian, is of Armenian descent, became Kerkorian's top lieutenant, to run the last independent studio in Hollywood and to sell it in a heated auction between Time Warner and Sony could be its own dramatic release. There is even a potential sequel: for all the sniping in the industry, Yemenidjian is being talked of as a possible successor to Michael Eisner, who will step down as chief executive of Walt Disney in 2006.

Yemenidjian was born in Argentina; his father was a shoemaker who had fled Armenia. The family moved to Los Angeles when Alex was 13.

Yemenidjian graduated from California State University at Northridge in 1977 and founded his own accounting firm. In 1989, Yemenidjian went to a lunch that would change his life. A mutual friend of his and Kerkorian's, George Mason, a managing director of Bear Stearns, planned for them to meet.

Two days later, he recounted, "Kirk asked me if I would take a leave of absence from my firm for six months to work on a special project."

Yemenidjian continued: "He never told me what the project was and I never asked. When I showed up on January 1, 1990, I found out the project was selling MGM."

Kerkorian, 87, who has not given an interview to the news media in decades, said through a spokeswoman, "Alex is one of the most accomplished CEOs I have worked with, and I am very happy with what he and his team have achieved at MGM."

That's a really good and insightful article.