Sony Corp.’s exclusivity agreement on talks with Metro-Goldwyn-Mayer expired yesterday without a deal to buy the Lion.
But that doesn’t mean Sony won’t ultimately seal a deal for MGM, the legendary Hollywood studio controlled by billionaire Kirk Kerkorian.
The Sony-led investor group, which originally received a 15-day exclusivity period, asked MGM two days ago to extend the window by another two weeks for exclusive access to the company’s books.
At press time yesterday, MGM was said to be negotiating with Sony and its three private equity partners – Texas Pacific Group, Providence Equity Partners and Credit Suisse First Boston’s private equity arm – for a possible extension.
Representatives for MGM and Sony declined comment.
Even with an extended exclusivity agreement, there is no guarantee that a deal between MGM and the Sony group will be consummated, sources warned.
For one thing, key sticking points remain to be worked out between Sony and its partners. According to sources, Sony is trying to reach an agreement with backers over certain terms, including the deal structure and exit strategy.
Meanwhile, other potential suitors, including Time Warner and General Electric’s NBC, could possibly step in with a rival offer.
So far, though, no other parties have come forward with serious bids – mainly because they have had their hands full with other deals.
By pressing for exclusive talks, Sony is turning its rivals’ distractions to its competitive advantage, sources said.
“No one expected the Sony team to get a deal signed in the last 15 days,” one industry executive noted. “The exclusive simply let them speed ahead. Sony knows that no one is going to jump into MGM right now and devote the resources to doing a deal when Sony is way ahead of them on due diligence.”
Under the terms of the proposed buyout, Sony and its partners would put in a total of $1.5 billion of equity, with the remainder to be funded with debt. Sony would have a minority stake in the new stand-alone company and likely would have the option to buy it at a later date.
The group has engaged several major banks – CSFB, Citigroup, J.P. Morgan and Bank of America – to help finance the deal.