MGM says $14 bil asking price too high
This article was updated at 8:52 p.m.The Lion has left the jungle. MGM announced Tuesday it’s exiting the tumultuous auction for Vivendi Universal Entertainment because “the seller’s current price expectation would not be consistent with our valuation of the assets.” Move follows word from VUE’s French parent Viv U that buyers must be prepared to pay north of $14 billion for Viv U’s 93% stake in VUE. That translates into an acquisition price of more than $15 billion, including minority stakes in the Universal film, TV and theme park operations. General Electric’s NBC is probably the sole prospective buyer that could justify such an eye-popping valuation for VUE. Peacock could fashion a stock-based deal in which VUE is given a $15 billion valuation at the outset of a VUE-NBC merger. Later, if Viv U wants to cash out, it would be guaranteed a lesser amount. Though other stock-based scenarios could emerge — indeed, Viv U hints it might opt to spin off VUE without any merger partners — no other suitors would seem to boast the market muscle to support a $15 billion valuation on the assets. Buyback offer Separately Tuesday, MGM majority owner Kirk Kerkorian announced a tender offer to buy up to 15 million MGM shares at $16 a share. Repping a stock buy of up to $240 million, move partially reverses Kerkorian’s sell-off of 25 million shares in January. That transaction was aimed at exploiting certain tax writeoffs for the billionaire’s Tracinda investment vehicle. The latest announcement reflects a stated belief that “recent trading prices of MGM’s common shares do not reflect MGM’s full value.” Move was announced after the close of market trading. Lion shares rose 14¢ to $12.84 in New York Stock Exchange activity Tuesday. If the full tender offer is completed, the transaction would boost Kerkorian’s MGM stake to 73% from 68%. A spokesman said the move was unrelated to a recent promise by MGM chairman-CEO Alex Yemenidjian to try to return some of the studio’s cash reserves to shareholders if the Lion was unsuccessful in its bid to buy VUE. No decision had been made on when or if such a mechanism might be devised, the MGM spokesman said. Other suitors In addition to an $11.5 billion bid from MGM and an unspecified offer from NBC, Viv U’s auction for the Universal entertainment assets has also attracted suitors such as John Malone’s Liberty Media, Sumner Redstone’s Viacom and an investment group led by former Viv U vice chairman Edgar Bronfman Jr. An earlier offer by one-time Hollywood mogul Marvin Davis was rejected as too low. That $20 billion bid was for VUE plus Universal Music Group, which now has been excluded from the auction by Viv U. MGM initially bid $11.2 billion for VUE, then raised the offer by $300 million in an attempt to wrest additional info on Universal’s film and TV operations. Much of that info was eventually provided, but the move earlier this month triggered an exchange of toughly worded communications between Viv U and MGM. Similarly, Malone was rebuffed when he requested exclusive talks between Liberty and Viv U. Liberty and other bidders also have pressed for more info on the VUE assets than was initially provided. Industryites expect the auction — a messy process making nobody happy on either side of the activity — to drag on past Labor Day, and many predict some of the bidders may combine their offers. In fact, an MGM-NBC combo was rumored at one point, but there appears no such activity at present. Viv U would not likely be playing such hard ball on valuation if it didn’t feel talks with at least one party are well-progressed, and some believe NBC could be involved in quasi-exclusive negotiations. “I would think they have something up their sleeve,” an industryite observed, citing the boldness of Viv U’s VUE valuation. Viv U hasn’t made any official announcement regarding its valuation expectations, but bidders have been notified discreetly. (Meredith Amdur in New York contributed to this report.)
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