Metro-Goldwyn-Mayer Inc.'s stock rose sharply after published reports said
the company is seeking to sell off its movie studio for as much as $7
billion.
MGM stock rose as high as $23.25 per share Tuesday, up $3.37 (17 percent),
before closing at $22.27, up $2.39 (12 percent).
According to a report in the Los Angeles Times, MGM's largest
shareholder, billionaire Kirk Kerkorian, has hired New York investment banker
Goldman, Sachs & Co. to find a buyer for the studio.
Possible buyers for MGM include AOL Time Warner Inc., The Walt Disney Co.,
Viacom Inc., Vivendi Universal S.A., News Corp. and Rainbow Media Holdings Inc.,
the programming arm of Cablevision Systems Corp.
MGM's main asset is its huge movie library -- with about 4,100 films -- which
could be attractive to established programmers.
MGM has interests in about one-dozen television channels outside of the
United States.
Last year the company agreed to pay $825 million for a 20 percent interest in
four Rainbow cable networks -- Bravo, American Movie Classics, The Independent
Film Channel and WE: Women's Entertainment.
According to one investment banker who valued MGM at between $4 billion and
$5 billion, potential suitors are balking at the high price.
'The people I have spoken to don't seem terribly interested, at least not at
this [$7 billion] level,' the banker said.
Salomon Smith Barney media and entertainment analyst Jill Krutick valued MGM
at 'close to $6 billion,' adding that on a sum-of-the-parts basis, the company
could justify a $7 billion private-market value.
In a prepared statement, MGM would not confirm that it is on the block, but
it said it routinely looks at possible business combinations.
'As we have stated numerous times over the past two years, we have been
regularly evaluating business-combination opportunities,' MGM said in the
statement.
'No agreements regarding a transaction have been reached, and there can be no
assurance that the company will decide to enter into any transactions,' the
company added. 'We will have no further comment unless and until it is
appropriate.'
