A month after reports surfaced that Sony was preparing a $5 billion bid to acquire MGM, the Japanese conglom has finally admitted publicly that exclusive talks are in fact under way.
At the conglom’s annual strategy meeting in Tokyo on Wednesday, Sony Corp. of America chairman Howard Stringer said it was “preparing an exclusive analysis” of MGM and that it was “four or five days” into a 20-day negotiating period.
Stringer’s statement marked the first time reps from either studio admitted that they were in talks.
Deal would provide Sony access to MGM’s coveted 4,000-plus film library that includes the James Bond and Pink Panther series — fodder for DVD sales and TV outlets.
Acquiring MGM would further fulfill Sony chief exec Nobuyuki Idei’s vision of greater interconnectivity between Sony electronics products and its film content.
Sony execs stressed that they were pursuing negotiations cautiously.
“This is a business that we have persevered with since the 1990s,” Idei said, “and we do not plan to acquire a business that will result in a loss.”
Stringer said, “We’re being very conservative.”
A Sony official said the talks were less focused on an acquisition price than on Sony Pictures’ wish to conduct due diligence on MGM, which is 74%-owned by billionaire Kirk Kerkorian. Banking sources indicated that the initial target takeout price for MGM was around $21.50 per share (or $13.50 today, adjusted for this week’s special $1.9 billion dividend payment).
In April, MGM postponed its annual shareholders’ meeting from May to late June in order to digest its strategic options and weigh a possible sale of the company. At that time, Sony and its private equity backers, which include Providence Equity Partners and Texas Pacific Group, had completed the first stage of due diligence on MGM.
Sources say that if Sony and its financiers don’t seal the deal in the coming days, Time Warner may be highly interested in restarting its own negotiations.