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Lion stock uncaged

52-week high feeds off MGM merger talk

MGM shares hit a 52-week high Monday as Lion-keeper Alex Yemenidjian tubthumped the studio’s financial perf to Wall Streeters, and industryites eye prospects for an MGM combo with Time Warner or another company.

Majority-controlled by billionaire Kirk Kerkorian, MGM has held early talks about a possible Warner Bros.-MGM merger of some sort (Daily Variety, Dec. 18). But the Lion has been on the prowl in a variety of situations, including a newly revealed approach to Sony.

Speaking at a Smith Barney CitiGroup investors confab in Phoenix, Yemenidjian declined comment on contacts with Time Warner.

“We never comment on speculation about particular transactions,” he said.

MGM made offer

But the chairman-CEO added that MGM had made an “all-cash offer” for an unspecified other entertainment company. It’s believed Yemenidjian was referring to a recent offer for Sony’s film and TV operations.

A well-placed source said the Sony offer was made just before Time Warner was approached. The Sony offer is no longer on the table, but overtures to TW are ongoing, the source said.

MGM brass have repeatedly expressed interest in a possible biz combo to broaden the Century City-based studio’s distribution and other operations. Its most public bid to date was last year’s $11.5 billion offer for film and TV assets of Vivendi Universal.

After losing to NBC in that auction and being rebuffed by Sony — for a second time, following a similar response to a 2002 approach — the Lion decided to return some surplus cash to shareholders via a stock tender offer.

“Absent those opportunities we have no debt, so continuing to acquire our stock would present the best opportunity,” Yemenidjian told the investors conference without specifying any particular offers other than the Viv U bid.

Cash flow impressive

Also at the investors confab, Yemenidjian stressed that MGM’s existing film and TV operations are already producing impressive cash flow, estimated at $180 million-$185 million in calendar 2003.

“We’re significantly ahead of schedule,” the chairman-CEO said.

He added that operating overhead is currently running at 11% of revenue. “That’s a figure that’s relatively low for our industry and one we’re very proud of,” Yemenidjian said.

MGM will release at least 10 movies this year, and its United Artists special unit at least seven pics, he said. The MGM releases are expected to carry an average studio investment of $25 million per pic and UA titles under $4 million apiece.

Lion shares closed up 21¢, or 1.22%, at $17.40 on Monday.

That bested a previous closing high of $17.35 set Dec. 30. The stock set a 52-week low of $9.22 last Feb. 12.

The stock has been bolstered of late by MGM’s offer to buy back up to 10 million shares in a so-called Dutch auction, in which shareholders will get anywhere from $16.25 to $18 a share for tendered shares.

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