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Sony-led Investment Team Inks Deal to Buy MGM

Sep 23, 2004  •  Post A Comment

The lion has finally been tamed.

A Sony-led investment consortium on Thursday inked an agreement to acquire venerable movie studio Metro-Goldwyn-Mayer for about $2.94 billion and the assumption of $2 billion in debt, ending months of tussling among the participants about how the transaction would be structured and who would control the combined entity.

As part of the transaction cable giant Comcast followed through with an expected investment in the combined entity.

Under the terms of the deal the investment team committed to $1.6 billion in equity financing to acquire MGM, while investment banks JPMorgan Chase and Credit Suisse First Boston have committed to lead a group of banks in lending the investment team $4.25 billion in debt financing.

Within the investment team, Sony will pay $300 million, while Comcast has committed to pay $300 million. Among the private-equity firms participating in the deal, Providence Equity Partners will pay $525 million; Texas Pacific Group will pay $350 million; and DLJ Merchant Banking Partners will pay $125 million.

Specifically, the investment team will pay $12 a share for MGM stock and assume the studio debt, which currently totals around $2 billion.

The deal is expected to close some time next year.

In the meantime, MGM will continue to operate as an independent company, producing films and television shows. After the transaction closes, MGM will continue to operate under its present name, though films will be co-financed with Sony Pictures Entertainment. SPE will also distribute MGM’s existing film and TV content through Sony’s global distribution channels.

For Comcast’s part, the cable operator will begin making Sony and MGM content available on its video-on-demand platform as well as develop and launch new cable channels based on content from both studios.

In addition to the financing work performed by JPMorgan Chase and CSFB, the two banks, along with Citigroup, acted as financial advisors to the investment group. Goldman Sachs, Morgan Stanley and Banc of America Securities acted as financial advisors to MGM. Sony’s advisors were Allen & Co. and The Blackstone Group.