Indian Tiger Eyes Wounded MGM Lion
After tying up with Steven Spielberg’s DreamWorks (NASDAQ:DWA) last year, India’s Reliance ADA Group is eyeing a purchase of another Hollywood studio, Metro-Goldwyn-Mayer. But the Indian company isn’t willing to pay anything close to what MGM is seeking, a person familiar with the matter said.
MGM, which is struggling with $3.7 billion in debt stemming from its 2005 leveraged buyout, has extended first-round bids beyond this week as it tries to galvanize more interest in its assets, the person said. Source
MGM, the owner of a library with more than 4,000 titles, including classics such as the Pink Panther and James Bond movies and more recent ones such as Legally Blonde, a series of comedy films, has been put on the block by its lenders, a consortium of over 100 financiers led by JPMorgan.
Twelve potential bidders with background in media and movie-making have signed non-disclosure agreements, according to a Reuters report. Banking sources said Reliance Entertainment is among them.
A takeover would give Reliance a position at the heart of Hollywood. It last year provided $325m of equity to fund recreating Steven Spielberg's DreamWorks studio as an independent entity.
Senior Anil Dhirubhai Ambani Group official Amitabh Jhunjhunwala, who is also on the board of DreamWorks, Mr Spielberg’s movie studio which is 50% owned by Mr Ambani, is believed to have met with the studio heads of MGM and the bankers in Los Angeles last week. When contacted, a spokesperson for Reliance Entertainment said “as a policy, we do not comment on speculation”. Source
The Indian billionaire, whose other businesses range from mobile telephony to mutual funds, also has production deals with other leading directors and actors, such as Brad Pitt and George Clooney.
People familiar with the auction said the studio was asking for about $2bn, well below the sum it owed creditors, but predicted opening bids of $1.5bn-$2bn. Barclays Capital(NYSE:BWX) said: "We find it unlikely that MGM's creditors would cleanly agree to a sale price materially below $2bn."
The studio missed an interest payment last year when it failed to raise the capital required for an ambitious production schedule. It must make a $250m payment by April on a revolving credit facility and pay off its $3.7bn term loan by 2012. Lenders have granted it forbearance from interest payments until the end of this month. Source
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