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Source: Sony Lines Up Financial Ducks for MGM

18 Jun, 2004 By: Erik Gruenwedel

Sony has apparently dealt with its financial challenges in structuring a potential $5 billion acquisition of film studio Metro-Goldwyn-Mayer, according to a source familiar with the negotiations.

With a reported rival offer from Time Warner in the wings, an announcement by MGM is expected at its rescheduled board meeting June 29.

A merger between Sony and MGM would see a combined home video business (with Sony's Columbia TriStar Home Entertainment) that, in 2003, would have generated $3.69 billion, for 16.5 percent of the total home video marketplace, according to Video Store Magazine Market Research, keeping CTHE in its same No. 3 market share position behind Buena Vista Home Entertainment's 19.6 percent.

About $3.5 billion of the purchase price would be financed through a consortium of private equity firms, including Providence Equity Partners, Credit Suisse First Boston and Texas Pacific Group, with Sony putting up the remaining $1.5 billion.

“They've worked out most of that, and they're close to making some sort of offer,” said the source.

While maintaining MGM as a separate organization, the combination of the two film divisions would result in substantial layoffs to MGM's 1,300-employee studio workforce, leaving essentially nothing more than a small movie production unit.

“It would be an almost complete downsizing on the MGM side,” said the source.

At press time, an MGM representative declined comment; a Sony spokesperson was not immediately available.

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