Sony-Led Group Acquires MGM

Sep 13, 2004  •  Post A Comment

Metro Goldwyn Mayer is being sold once again, this time to a group led by Sony Corp., for a price reported to be nearly $5 billion. The acquiring group now also includes Comcast Corp., the largest operator of cable TV systems in the United States, which had failed earlier this year in a bid to acquire The Walt Disney Co.

Sony and partners and MGM, which is majority-owned by billionaire Kirk Kerkorian, reached an agreement in principle on Monday, shortly after the only other significant bidder, Time Warner, said it could not work out a satisfactory deal.

Sony will acquire control of MGM and United Artist’s 4,000-title film and TV episode library, the largest in Hollywood. It includes such jewels as the James Bond movies, the “Rocky” movies and the “Pink Panther” movies. The library is composed of United Artists movies dating back to 1919, MGM movies dating back to 1986 (the pre-’86 library belongs to Time Warner), and the libraries of Orion Pictures, Samuel Goldwyn Pictures and others.

The Sony-led group will also get MGM’s film and television operations and a network of cable TV channels that play in more than 100 countries around the world. Sony and partners are expected to pay about $12 per share for MGM and assume about $2 billion in debt.

Joining Sony and Comcast in acquiring MGM will be Providence Equity Partners, Texas Pacific Group and an entity described as an investment arm of Credit Suisse First Boston.

One of the issues for MGM had been whether the Sony-led group could actually raise the necessary financing to do the all-cash deal. To ensure it is acting in good faith, the Sony group has agreed to pay a $150 million nonrefundable deposit. In other words, if the deal falls through for any reason, MGM gets to keep the $150 million.

Until late last week it appeared that Time Warner was in the lead to acquire MGM, even though it had bid slightly less than Sony. Time Warner said in a statement on Monday that MGM was of great value, but the parties could never agree on a price that would have been a “prudent use of [Time Warner’s] growing financial capacity.”

While most of the existing MGM employees will likely lose their jobs in the sale, there is still a possibility that Sony will keep a film production unit going under the MGM banner. This would fulfill some existing obligations and give Sony another label to distribute, in the same way that it currently handles movies from its Screen Gems unit. There is a great saving in sharing the back-office costs of marketing and distribution.

On the television side, Sony will now inherit a number of successful syndicated shows. They include “Stargate SG-1” and its recent spinoff “Stargate Atlantis;” “The Outer Limits;” “Jeremiah;” “Dead Like Me;” and the syndicated show “She Spies.”

There is a certain irony to the acquisition. Sony Pictures Entertainment’s main operations in Southern California are in Culver City on the same physical lot that for many years in the 20th century was the home of MGM when it was a movie powerhouse. Now the famous lion logo will return to its longtime home.