TW inches closer to MGM deal
MGM talk heats up
SepT 2, 2004
Buzz of a Time Warner takeover of MGM continued to escalate Wednesday, a day after reports surfaced of an imminent deal between the two (HR 9/1). After rising more than 6% for the day on sale talk, MGM shares dropped back in after-hours trading following MGM's release of a statement calling press reports that it could sell for as high as $5 billion "inaccurate."
An MGM spokesman declined further comment on the statement, issued after the market's close. The announcement would seem to indicate that MGM will not fetch quite as high a price as majority owner Kirk Kerkorian had originally hoped; a $5 billion price tag had been widely discussed for several months.
Late Wednesday, the Wall Street Journal reported on its Web site that Time Warner had prepared an all-cash offer of $4.5 billion-$4.6 billion. That represents a departure from the potential Time Warner bid sources had previously discussed, which would have had the media conglomerate giving Kerkorian a stock deal rather than cash.
Time Warner has significantly reduced its debt during the past year and last month made a quick $1 billion windfall selling shares of Google that it acquired through America Online's investment in that company before it went public. Some had speculated that a stock deal might be complicated for Time Warner because of an ongoing U.S. Securities and Exchange Commission investigation into AOL's accounting practices.
Time Warner has looked at MGM before, as have several of the other major studios. Most recently, Sony was reported to be seriously considering a bid for MGM in the spring and summer. However, sources said that deal stalled because Sony has been unable to come to final terms with its partners in the proposed investment, Texas Pacific Group and Providence Equity Partners.
The main attraction for buyers is MGM's vast and rich library of more than 4,000 films. Time Warner is very familiar with the catalog, as it had distribution rights to many MGM titles for years via a deal struck by Ted Turner in the 1980s.
An MGM spokesman declined further comment on the statement, issued after the market's close. The announcement would seem to indicate that MGM will not fetch quite as high a price as majority owner Kirk Kerkorian had originally hoped; a $5 billion price tag had been widely discussed for several months.
Late Wednesday, the Wall Street Journal reported on its Web site that Time Warner had prepared an all-cash offer of $4.5 billion-$4.6 billion. That represents a departure from the potential Time Warner bid sources had previously discussed, which would have had the media conglomerate giving Kerkorian a stock deal rather than cash.
Time Warner has significantly reduced its debt during the past year and last month made a quick $1 billion windfall selling shares of Google that it acquired through America Online's investment in that company before it went public. Some had speculated that a stock deal might be complicated for Time Warner because of an ongoing U.S. Securities and Exchange Commission investigation into AOL's accounting practices.
Time Warner has looked at MGM before, as have several of the other major studios. Most recently, Sony was reported to be seriously considering a bid for MGM in the spring and summer. However, sources said that deal stalled because Sony has been unable to come to final terms with its partners in the proposed investment, Texas Pacific Group and Providence Equity Partners.
The main attraction for buyers is MGM's vast and rich library of more than 4,000 films. Time Warner is very familiar with the catalog, as it had distribution rights to many MGM titles for years via a deal struck by Ted Turner in the 1980s.
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