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Update: Sony Scores MGM

13 Sep, 2004 By: Holly J. Wagner

And the winner is … Sony Corp.

Sony and a group of investors have signed a deal to acquire MGM for $12 per share, the companies announced today.

Investors Sony Corp. of America, Providence Equity Partners Inc., Texas Pacific Group and DLJ Merchant Banking Partners struck a deal shortly after Time Warner announced it would drop its bid.

Under the agreement, the consortium would assume MGM's debt. MGM received a security deposit of $150 million today pursuant to a deposit agreement that MGM is filing with the Securities and Exchange Commission. MGM management is expected to recommend the proposed merger to its board by Sept. 27.

Time Warner had bowed out of bidding earlier in the day.

The parties disclosed little else about the transaction, but acquiring the MGM library is widely viewed as a good strategic move for Sony, which is also backing the Blu-ray high-definition DVD format. Time Warner is in the HD camp, and analysts have said the MGM library would be a boon to the emerging format.

Time Warner was unable to reach suitable terms.

“Unfortunately, Time Warner could not reach agreement with MGM at a price that would have represented a prudent use of our growing financial capacity,” CEO Dick Parsons said. “We are confident that there are other capital allocation choices that will enable us to build shareholder value.”

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