It looks as if the lion may be tamed by Time Warner.
After switching its offer from mostly stock to primarily cash, the world’s largest media company has quickly emerged as the suitor most likely to walk away with the assets of Metro-Goldwyn-Mayer. That is the case even though Time Warner’s offer of between $4.5 billion and $4.6 billion is less than the $5 billion proposal presented earlier this summer by Sony Pictures Entertainment and a team of private-equity players.
Thanks to the difficulties Sony has had sorting out an ownership structure with its private-equity partners Texas Pacific Group and Providence Equity Partners, Time Warner has been able to slip into the lead position with a cleaner offer-albeit a smaller one.
When a deal might be completed remains an open question. Some reports say MGM might agree to a sale as early as this week, while sources within the companies involved say issues still have to be ironed out before a deal can be consummated.
Representatives of both Time Warner and MGM declined to comment.
After initially proposing a deal in which MGM majority shareholder Kirk Kerkorian would receive unregistered Time Warner stock-something Mr. Kerkorian reportedly favors because of its more favorable tax impact-Time Warner changed course and decided to present MGM with a cash bid.
Sources familiar with the situation said Time Warner decided against issuing stock because of the potential complications of doing so against the backdrop of the Securities and Exchange Commission’s ongoing investigation into the accounting practices of Time Warner’s America Online unit.
Another sticking point was handing Mr. Kerkorian a sizable stake in the company, given his reputation as an activist shareholder.
Sony, meanwhile, is said to be continuing to work out an arrangement with its private-equity partners that would allow the studio to control the management of MGM, even if it’s putting up the least cash. The Sony-led bid involves $3 billion in cash, financed largely by private-equity and debt financing, plus the assumption of $2 billion in debt.
At stake is a studio brand name that is among the most recognizable in the world, the legendary lion logo, a 4,000-title film library (including rights to the James Bond movie franchise), more than 10,000 television episodes and interests in a series of branded cable networks in more than 120 countries.