MGM rises on talk of dividend
By Holly Yeager in New York

Financial Times
Mar 17, 2004

Shares of Metro-Goldwyn-Mayer were up sharply yesterday on word that
the Hollywood studio was considering a one-off dividend for
shareholders.

MGM officials would not discuss the timing or size of the
dividend. But people familiar with the situation said a distribution
of $6-$9 was under consideration, and a decision could come as early
as next month.

In a statement late Monday, Alex Yemenidjian, MGM chairman and chief
executive, said the studio is “committed to sharing the company’s
wealth with our shareholders”. He noted MGM’s recent tender offer and
a share buyback programme, and said the company is exploring other
alternatives, including the dividend.

The dividend distribution would bring $1bn-$1.5bn to financier Kirk
Kerkorian, who, with his Tracinda Corp investment firm, owns 74 per
cent of MGM’s shares.

MGM is prized for its film library, which includes classics such as
The Wizard of Oz and Gone With the Wind. Mr Yemenidjian has in the
past indicated that he would like to see the company become part of a
larger group, either through a merger or acquisitions. Last year, the
company bid $11.5bn to buy the US entertainment assets of Vivendi
Universal but NBC television ultimately struck a deal to merge with
the Vivendi assets.

But some analysts reacted cautiously to the possibility of a
dividend. MGM has no debt and was expected to borrow the $1.4bn-$2.1bn
to pay the dividend, should it decide to make it.

Jessica Reif Cohen, a Merrill Lynch analyst, questioned the company’s
“strategic direction”, saying the borrowing would mark “a potential
re-leveraging of the business”.

“The dividend does little, if anything, to enhance MGM’s strategic
position and we question if this dividend implies a lack of investment
opportunities for MGM,” she wrote.

MGM shares were up 8.46 per cent at $17.57 in midday trading
yesterday.