Time Warner Joins Bidding For MGM

Sony Offered $5 Billion But Hasn't Closed Deal

Kirk Kerkorian, the crafty 86-year-old billionaire dealmaker, suddenly has another suitor for his Metro-Goldwyn-Mayer Inc. movie studio, with Time Warner Inc. bidding to derail an offer from Sony Pictures Entertainment.

Sony, whose summer blockbuster "Spider-Man 2" hit theaters Wednesday, made a $5 billion cash bid to buy MGM and its highly coveted 4,000-film library in April and entered into an exclusive negotiating agreement.

But Sony has been unable to complete the deal, though the company said it remains committed to buying MGM. That opened the door for rival entertainment giant Time Warner to make its cash-and-stock bid for MGM, of which Kerkorian controls 75 percent.

None of the companies would comment publicly on their interest, but a Time Warner executive said privately that the company would not be gulled into a bidding war and would not match Sony's $5 billion bid. Robert C. Wright, head of General Electric Co.'s NBC Universal, has also said he is interested in MGM's film library but has not bid for it.

At MGM's shareholders meeting on Tuesday, chief executive Alex Yemenidjian acknowledged that the Time Warner bid gives MGM "more strategic alternatives available to us than we realized."

The question for all the companies is where MGM would best fit.

Unlike the other major studios, MGM does not make very many movies and almost no big-budget ones, although it is home to franchises such as James Bond and the Pink Panther. The studio was struggling financially when Yemenidjian took over as chief executive in 1999 and now concentrates on small-budget films that can be easily sequelized, such as "Barbershop," which spawned "Barbershop 2" and the upcoming "Beauty Shop."

Sony and Time Warner's Warner Bros. are both in the business of making $200 million major releases and could neatly fold in MGM's filmmaking assets -- or close them.

"If [Time Warner] bought MGM, we believe they would essentially shutter MGM's new production, and purely harvest the library cash flow [and] production franchises (like Bond) as well as exploit the developing international movie channels MGM has created," the investment research firm Fulcrum Global Partners LLC wrote in an analysis of the MGM-Sony-Time Warner activity yesterday.

The appeal of MGM is not its ability to produce movies. It doesn't even have a movie lot of its own; an upcoming remake of "The Pink Panther" starring Steve Martin is being shot on other lots in Los Angeles. When Sony and Time Warner look at MGM's library, they think "DVD" and drool.