NEW YORK — Metro-Goldwyn-Mayer Inc. “is considering” possible mergers with other companies, MGM said in an SEC filing late Wednesday, as part of its “goal of becoming an integrated global entertainment company.”
MGM said it was considering “business combinations with companies with strengths complementary to those of the company and acquisitions of smaller niche entertainment companies.”
It gave no more details and a spokesman for the Lion declined to comment. The wording indicates that MGM may be in very early consideration of potential mergers that may never come to fruition but had to be disclosed because of securities laws.
The company has made clear for the past year that it was seeking alliances to improve its presence in distribution, and analysts have predicted a merger for just such a purpose.
The revelations came in a filing made by the Lion for a $250 million stock offering announced last week to boost MGM’s capital base, which has been depleted by disappointing pics and a stronger-than-expected increase in television production in recent months.
MGM said in the filing that, as a result of the financial crunch, it had reduced its theatrical output target by one to two pics a year from the previous target of 10 to 12 and “may seek partners in co-production, split-rights or other partnering arrangements” for some of its films.
The dimensions of MGM’s financial pressures were highlighted in the filing when it noted that as of July 31, the company had only $132 million available under its $1.3 billion credit facility.
It said it expects to use all of the $250 million raised by the stock offering to pay down its credit line but will likely draw down the credit line again in the future. As a result, it said the credit line may have less than $20 million available “at various times through the end of 1999.”
MGM noted that as a result of all these factors, “it may cease to be in compliance with certain financial ratio covenants during 1999” and may need to negotiate amendments to its credit line with its lenders.
It has begun such discussions and “believes it will be able to negotiate” the amendments, it said in the filing.
MGM stock has been ravaged by the stock market slump of recent days, closing down 81¢ Wednesday to $17.12. The Lion is protected, however, by majority shareholder Kirk Kerkorian’s promise to underwrite the offering.
Kerkorian has agreed to put in at least 90% of the $250 million, covering his share and that of 25% shareholder Seven Network, and will buy more stock if public shareholders decide not to take up their portion.