Media News

UPDATE 1-MGM gets two bids; Time Warner stalls-sources

* Lions Gate, Access Industries bid for MGM

* Time Warner still considering a bid

* Deadline for bids extended

NEW YORK, March 22 (Reuters) - Lions Gate Entertainment LGF.N and billionaire Len Blavatnik's industrial holding company, Access Industries, have put in second-round bids for Metro-Goldwyn-Mayer, sources told Reuters on Monday, adding that Time Warner Inc TWX.N was still considering a bid.

The Friday deadline for a second round of bids for MGM was unofficially extended after Time Warner, the most likely buyer for the famed studio, did not immediately put in a bid, sources familiar with the matter said.

Bids for MGM were still being considered on Monday, two days after the Friday deadline, the sources said. As of mid-day Monday, Time Warner had not put in a bid.

The value of these offers is likely to be less than $1.5 billion, far less than the level MGM was initially expecting, the sources said.

The sources spoke on condition of anonymity because details of the auction have not yet been made public.

MGM, Lions Gate, Access and Time Warner declined comment.

The studio, struggling with $3.7 billion of debt, said in November it was exploring a potential sale of the company. As the auction progressed, and buyer interest in the company dwindled, sources told Reuters that MGM was considering a prepackaged bankruptcy along with a sale.

The move was intended to offer a healthier company to a buyer by reducing liabilities to strengthen its balance sheet, the sources said.

But with bids that are likely to be disappointing, the studio and its creditors may opt for a prepackaged bankruptcy without a sale, sources told Reuters in the past few days.

A committee of MGM’s creditors is expected to meet on Tuesday and will assess the company’s situation, the sources said.


The storied movie studio, which enlisted turnaround specialist Stephen Cooper last year to help it restructure, has been saddled with the debt from a 2005 buyout and also has a $250 million revolving credit facility maturing in April.

MGM, whose vaults contain more than 4,000 film titles, received a lot of initial interest from rival media companies and buyout shops, but not all of it has translated into actual offers.

Liberty Media Corp LINTA.O, AT&T Inc T.N and independent studio Summit Entertainment were among the companies that signed non-disclosure agreements to look at the business.

News Corp NWSA.O offered to provide cash and help with restructuring debt, but it has not put in a bid for the company, sources said.

MGM’s library includes the James Bond and Pink Panther franchises. The studio also owns a piece of the two “Hobbit” films to be produced by “Lord of the Rings” director Peter Jackson. But it has been struggling to create new hits and is also trying to cope with plunging DVD sales caused by consumers moving online.

MGM's debt stems mainly from a $2.85 billion buyout in 2005 by a group including four private equity firms -- Providence Equity Partners, TPG [TPG.UL], Quadrangle Group and DLJ Merchant Banking Partners, a unit of Credit Suisse -- and media companies Sony Corp 6758.T and Comcast Corp CMCSA.O.

The Lions Gate bid comes just after billionaire investor Carl Icahn offered to buy Lions Gate in a move designed to forestall the studio’s bid for MGM.

Even though shareholders are unlikely to bite because Icahn’s offer is low, Icahn’s argument that Lions Gate should focus on consolidating film and TV distribution rather than buying film libraries, could complicate matters. (Reporting by Jui Chakravorty and Yinka Adegoke; Additional reporting by Alex Dobuzinskis, Megan Davies and Emily Chasan; Editing by Steve Orlofsky)