Japan's Sony Corp and two US buyout firms are in advanced talks to buy US film studio Metro-Goldwyn-Mayer Inc for about US$5 billion, putting the owner of James Bond movies back in play on Wall Street, sources said on Wednesday.
Sony initiated the talks because it wanted access to MGM's 4,000-plus film library that includes the James Bond and Pink Panther films and numerous Oscar winners, people familiar with the deal said.
Libraries provide steady revenues from sales of DVDs, videos and TV licensing.
Some analysts saw the news as an opening round in a new bidding war for MGM and most noted that talk of an MGM sale has surfaced often.
The studio is 74 percent-owned by 86-year-old billionaire Kirk Kerkorian and his Tracinda Corp investment firm. He bought MGM for US$1.3 billion in 1996 for a third time.
"They had talked to Sony [in the past]. We knew that," said Hal Vogel, a New York-based fund manager. "They had talked to many people. This is one that seems to be serious."
The buyout firms joining Sony are Texas Pacific Group and Providence Equity Partners, sources said. The three are expected to split a cash investment of US$1.5 billion and borrow the balance. MGM has hired investment bank Goldman Sachs to represent it, said sources who knew of the deal.
A deal would enable MGM shareholders to cash out for roughly US$21 a share, more than double the share price a year ago. MGM shares jumped 12 percent at US$19.75 on the New York Stock Exchange on the news on Wednesday while Sony's stock added 2.4 percent in Tokyo yesterday.
Key to an agreement would be whether MGM would pursue a one-time cash dividend of US$8 a share. MGM said late Wednesday it would put the plan to a board vote when it completed a refinancing package expected next week.
MGM, Sony, Texas Pacific and Goldman Sachs all declined to comment. Providence Equity could not be reached.
"I wouldn't take [talk of a deal] as gospel," said David Miller, an analyst with Sanders Morris Harris. "This is kind of an opening round in a long, protracted negotiation."
Emerging markets specialist Mark Mobius of Templeton Asset Management Ltd, which holds stock in Sony, said a deal made sense as Sony's electronics business faced greater competition and owning the library could be lucrative.
"I would have to ask the management how they will integrate this kind of software business -- you know the movie business, MGM and so forth -- into the other parts of their business, where these all fit," Mobius said.
Along with games and music, Sony's movie division is one the pillars of chief executive Nobuyuki Idei's vision of a interconnected world linking content with Sony's electronics.
Sony's acquisition of Columbia Pictures in 1989 for US$3.4 billion, the largest ever acquisition by a Japanese firm at the time, caused numerous headaches for Sony due to losses from elaborate spending budgets and box office duds.
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