Sources: MGM Delays Potential $3 Billion IPO for 'Skyfall,' 'Hobbit' Releases (Exclusive)

11:41 AM PST 10/22/2012 by Alex Ben Block
Columbia Pictures; Warner Bros.

First quarter could see bigger public offering from company, which shifts plans as tentpole pictures near wide releases.

MGM Holdings, the parent company of Metro-Goldwyn-Mayer, has decided to put off an initial public stock offering until at least the first quarter of 2013, sources tell The Hollywood Reporter.

Banking sources say, however, that not only will there be an IPO but it could top $3 billion -- bigger than originally planned -- because the company is convinced that its two tentpole pictures will wow Wall Street. A company source emphasized there is no fixed deadline.

Skyfall, the latest James Bond adventure starring Daniel Craig, is set for a Nov. 9 release, and Peter Jackson's trilogy starter The Hobbit: An Unexpected Journey hits theaters Dec. 13, so the MGM plan is to wait until the first quarter when the results of the two movies hit their books. MGM first planned an IPO before Skyfall, then pegged it to land between it and The Hobbit. Now the strategy is to wait for revenue from both films.

An MGM spokesperson declined comment Monday.

COVER STORY: 'The Hobbit' -- Inside Warner Bros. and Peter Jackson's $1 Billion Gamble

MGM is not distributing either movie but is a rights owner thanks to the historic role of the legendary studio. The company focuses on co-financing of movies, which helps minimize their financial risk. However, it also limits potential rewards.

Sony Pictures Entertainment will release Skyfall, which is being co-produced with Eon Productions. The movie is earning positive advance reviews and word of mouth, with some suggesting that 007’s number might turn up among Oscar contenders. 

Eon Productions, based in London, is a subsidiary of Danjaq, the privately held holding company that carries on the legacy of producers Albert R. “Cubby” Broccoli and Harry Saltzman, who began producing Bond movies in 1961. Saltzman sold his interest to United Artists, which is now owned by MGM. Broccoli died in 1996, but his daughter, Barbara Broccoli, and his stepson, Michael G. Wilson, have carried on as producers.

There also are high hopes for The Hobbit, the first of three new films directed and produced by Oscar winner Jackson, who had huge success with the Lord of the Rings series from the same author, J.R.R. Tolkien.

STORY: James Bond, 'Skyfall' Producers Spill Secrets

It was first revealed in July that MGM was considering going public, though few details have trickled out aside from the hiring of Goldman Sachs as potential lead manager. Since then, JPMorgan Chase & Co. has been identified as a co-manager of the potential IPO.

The IPO filing apparently was done under the JOBS (Jumpstart Our Business Startups) Act, which allows companies with less than $1 billion in annual revenue to submit preliminary prospectuses with complete confidentiality. MGM is not obligated to reveal its “book,” the filings that detail its business and balance sheet, until three weeks before it starts a “road show” to market the IPO. It now appears that will not be before early 2013.

MGM was founded in 1924 and until the 1950s was among Hollywood’s biggest and most prestigious studios, releasing such classics as Gone With The Wind, Singin’ in the Rain, West Side Story and The Good Earth. But with the advent of television, MGM proved particularly unable to adapt, which led to downsizing and multiple ownership changes. Las Vegas investor Kirk Kerkorian bought and sold the studio three times, while also acquiring United Artists and other studios -- as well as a library of more than 4,000 titles.

STORY: Jonathan Glickman to Serve as President of MGM Motion Picture Group Through 2017

Kerkorian’s last sale, in 2004, was to a group of investors that included Sony, Comcast, Texas Pacific Group and Providence Equity Partners for a reported $4.7 billion.

By 2009 -- after more management turmoil and a growing debt load from acquisitions, sales and failed movies -- MGM was valued at less than $2 billion, and its new owners were looking for a way out. That led to a bankruptcy filing in 2010, with the studio emerging in December under the leadership of Gary Barber and Roger Birnbaum, who had been running production company Spyglass.

Shortly after emerging from bankruptcy, MGM negotiated a new revolving credit line of $500 million, which it used to retire debt and invest in new productions. JP Morgan and Deutsche Bank led that financing.

Investors reportedly include Highland Capital Management, Solus Alternative Asset Management, Davidson Kempner Capital Management and Anchorage Capital Group.

The cautious new approach helped control spending but did not result in instant success. MGM reportedly lost money on its investment in The Girl With the Dragon Tattoo (released by Sony) but made a profit on 21 Jump Street.

In the first three months of 2012, MGM Holdings reported revenue of slightly more than $23 million and reported it had about $200 million in cash on hand.

To make The Hobbit, MGM worked out a deal where it put in the value of its ownership, and Warner Bros. (and others) put up most of the money for production.

For the past year, MGM has focused on cleaning up its balance sheet and preparing for the potential IPO. In July, it bought out the nearly 18 million shares -- about 25 percent -- that had been owned by investor Carl Icahn for a reported $33.50 each, a total of about $590 million.

Earlier this month, Birnbaum stepped down, leaving Barber as the sole CEO of the new MGM. Last week, MGM extended Jonathan Glickman's term as president of its motion picture group through 2017.

Upcoming movies in which MGM has an interest include Hansel and Gretel: Witch Hunters (with Paramount), the sequel G.I. Joe: Retaliation (also Paramount), a reboot of Robocop (with Sony) and a remake of Carrie (with Sony’s Screen Gems).

 

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