MGM to give shareholders big dividend

This article was updated at 9:24 p.m.

Kirk Kerkorian and other MGM shareholders could be getting a Lion-sized present.

Century City-based studio is considering a move to give shareholders a special dividend of at least $6 a share — potentially repping a cool billion dollars or more to Kerkorian alone.

Reasons for the pricey move weren’t immediately clear. But an industry source familiar with the plan noted MGM would have to take on debt to pay for the dividend, and that could make the company less of a takeover target.

There’s been some speculation that Disney or another large entertainment company would try to acquire the Lion for its sizable movie library. Meanwhile, MGM topper Alex Yemenidjian has suggested the Lion is similarly on the hunt for new assets, so it would bear watching whether any dividend costs will hamper the studio’s ability to execute strategic acquisitions.

Late Monday, MGM issued a press release confirming the studio “is considering various alternatives designed to distribute more of the company’s wealth to shareholders.” Studio said no decision had been made yet on the timing or scope of such a move.

“In addition to the programs we have considered in the past … we also are exploring other alternatives such as whether to recommend to our board a significant one-time dividend distribution to all our shareholders,” Yemenidjian said in a statement.

Earlier in the day, a Reuters report suggested MGM was considering a dividend of $6-$9. Low end of that range would cost $1.41 billion to execute, the high end about $2.12 billion.

Lion execs are said to believe they could pay for the move from studio cash flow projected for the next two years. MGM, which is currently debt-free, has minimal cash on hand.

Kerkorian, who backed a management-led takeover of MGM in 1996, holds a 74% stake in the company. That would suggest a dividend payout to the billionaire octogenarian of at least $1.04 billion.

MGM shares rose significantly in after-hours trading on reports of the dividend plans. Stock fell 9¢ to $16.20 in regular market activity Monday.

Earlier this year, MGM shares rose a bit after Lion announced a Dutch auction buyback of shares. Most market watchers considered that move an attempt to bolster Kerkorian’s stock holdings, even though the majority owner holds no office at MGM.

Under the new plans, it’s believed MGM will offer the dividend to shareholders of record on a date later this month or next. That would bolster the stock once again, though the MGM share price would likely fall after the payout is concluded.

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