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MGM says IPO in works
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July 29, 1997: 3:29 p.m. ET
Hollywood studio's board will meet Friday to discuss investment advisor
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NEW YORK (CNNfn) - Less than a year after media mogul Kirk Kerkorian completed his purchase of Metro-Goldwyn-Mayer Inc., the legendary Hollywood studio is taking one step closer to going public again.
MGM's board is considering a spinoff of part of the company, Craig Parsons, an MGM spokesman, told CNNfn.
Although he didn't comment on the size of the deal, people familiar with the matter believe it could be in excess of $600 million, including stock and debt.
"A combination of debt and equity is what's being discussed," Parsons said.
Sources say the stock portion could represent as much as a third of the company.
The seven-member board of MGM, led by Kerkorian and Chairman and Chief Executive Frank Mancuso, will meet on Friday to begin the selection of an underwriting group for the public offering, Parsons said.
J.P. Morgan Securities and UBS Securities have prepared presentations for MGM officials, said people familiar with the matter. Goldman Sachs and Bear Stearns are also among the bidders believed to be interested in underwriting the offering.
Industry observers believe J.P. Morgan, which has done extensive work with MGM, may have the inside track. J.P. Morgan previously advised Kerkorian last year when the billionaire bought MGM for $1.3 billion and again in April when MGM acquired Metromedia's entertainment assets for $573 million.
However, because publicly traded stock would make MGM more vulnerable to takeovers, a number of options are being considered, including the creation of a new class of common stock with lesser voting rights.
"It's all being discussed," Parsons said.
If successful, the initial public offering would bring public one of the most successful studios in Hollywood history -- a studio that's been responsible for world-renowned movies such as "Gone with the Wind," "The Wizard of Oz" and "Singin' in the Rain."
While an MGM offering would be one of the higher profile deals of the year, investment bankers are believed to have advised the company to wait, the sources said.
"Nobody has ever felt on Wall Street that a studio is a good investment," said Porter Bibb, managing director at Ladenburg Thalmann.
Ladenburg, which was given access to MGM's financial statements, decided not to bid on the deal because the studio hadn't met the investment bank's minimum profitability requirements, Bibb said.
MGM has recorded operating losses in the last several years.
In order to strengthen the company, Kerkorian in April bought the video libraries of Orion and Goldwyn Entertainment, along with three film studios, from John Kluge's Metromedia Co. In addition, MGM retained the control of United Artists' film library after selling the MGM library to Ted Turner in 1986.
In addition, a new slate of MGM films is set for release beginning in August, including the December premiere of "Tomorrow Never Dies," the newest film from the studio's highly successful James Bond series.
"What they'll be marketing to Wall Street is asset value and growth potential," MGM's Parsons said.
-- Robert Liu
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MGM/UA
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