An investor group led by Sony Corp.
reached a “definitive agreement” to buy Kirk Kerkorian’s Metro-Goldwyn-Mayer Inc. studio for $12 a share, or about $2.9 billion,
to gain control of one of the world’s largest film libraries.
The group committed $1.6 billion in equity financing to buy
Los Angeles-based MGM and will assume about $2 billion in debt,
the companies said in a statement. Providence Equity Partners
invested $525 million, Texas Pacific Group contributed $350
million, Sony and Comcast each invested $300 million, while Credit
Suisse Group’s DLJ Merchant Banking put in $125 million.
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The purchase doubles Sony’s film library to 8,000 titles
about 15 years after Sony’s purchase of Columbia TriStar Motion
Pictures. The company is seeking to capture more home-video
business, estimated to rise to $26.1 billion in sales and rentals
this year, according to a PricewaterhouseCoopers LLP report.
The companies expect the purchase to be completed in the
middle of 2005. After the close of the transaction, MGM will
continue to operate under the Metro-Goldwyn-Mayer name as a
private company in Los Angeles. The companies announced an
agreement in principle on Sept. 13.
After the purchase is completed, Sony Pictures Entertainment
will co-finance films with MGM and distribute the MGM film and
television library, the statement said. Comcast will use the Sony
Pictures and MGM film libraries to start a video-on-demand service
on its cable-TV systems.
Kerkorian’s Las Vegas-based Tracinda Corp. agreed to vote its
shares in favor of the merger. Kerkorian is the president and
chief executive of closely held Tracinda.
The transaction would represent the third time that
Kerkorian, who owns 74 percent of MGM and tried unsuccessfully to
merge it with Sony in 2001, has sold the studio.
JPMorgan Chase & Co. will lead a bank syndicate to provide as
much as $4.25 billion in senior debt financing. CSFB is a co-
underwriter.
JP Morgan Chase, CSFB and Citigroup Inc. are advising the
investors in the Sony group. Allen & Co. and Blackstone Group LP
are advising Sony.
Goldman Sachs Group Inc., Morgan Stanley and Bank of America
Corp. are advising MGM.
Bloomberg News
