Lion postpones meeting to weigh sale options
NEW YORK — Saying it needs some time to digest its strategic options and weigh a possible sale of the company, MGM has pushed back its annual shareholders meeting before directors present their thoughts to stockholders.
Decision to shift the meeting from May 12 to June 29 comes a week after the Lion reported its first-quarter results but made absolutely no mention of the status of Sony’s proposal to buy out the company with investment backers Credit Suisse First Boston, Providence Equity and Texas Pacific.
MGM said postponement will give the company’s board of directors “additional time to evaluate such alternatives prior to the annual meeting.”
Sony and its private equity backers apparently have completed their first stage of due diligence on the company and its 4,000-title library, presumably to verify the financials and availabilities on the catalog in order to determine whether the reported valuation of $5 billion is realistic. Deal is believed to include some $2 billion in debt that was taken on to finance an $8-per-share dividend. Kirk Kerkorian, who owns 74% of the business, stands to earn about $1.4 billion from that payout this month.
Despite persistent rumors that Time Warner or NBC may be revisiting a purchase of the MGM catalog, no actual offers are believed to have been made.
On-again, off-again talks with the Lion over the years usually have broken down over price and control issues. Analysts speculate MGM may be trying to buy extra time to lure in extra bidders before granting Sony exclusive negotiating rights.
As for the $21-per-share valuation implied by the deal, one banker voiced concerns that even with the current DVD boom, the MGM library may have largely exposed its most lucrative titles and, without a steady supply of new features, will decline in value over time. Still, Sony’s offer seems designed to exploit the short-term explosion in DVD sales by leveraging the library’s estimated $400 million in annual cash flow (assuming overhead costs and current production are eliminated) to buy the company, giving Sony the option to purchase control from its financial partners in the future.