New York Post
April 23 2004

DICK’S LION’S SHARE

By ERICA COPULSKY

April 23, 2004 — Sony isn’t the only one circling The Lion.
Time Warner is once again talking to billionaire Kirk Kerkorian about
buying legendary Hollywood studio Metro-Goldwyn-Mayer – and this time
it may be bringing in a private-equity partner, The Post has learned.

According to sources familiar with the situation, the media giant has
in recent days discussed teaming up with buyout kingpin Thomas H. Lee
Partners to kick the tires on a possible deal for the last remaining
independent major film studio.

Time Warner is holding exploratory meetings with MGM, after
expressing renewed interest in the asset.

It’s unclear how serious Time Warner’s interest is or whether a deal
will materialize, sources warned.

Press officials from Time Warner, MGM and Thomas H. Lee declined
comment.

Time Warner had been in early-stage talks with MGM late last year.
But those talks broke down in early January after the parties failed
to agree on price or structure.

This time, rather than doing an outright purchase on its own, Time
Warner is considering bringing in private equity to help finance the
deal.

Such a deal would give Time Warner, the world’s biggest media
company, exclusive distribution rights to one of Hollywood’s most
valuable film libraries.

It would also give Thomas H. Lee – at the right price – a chance to
put money to work in the DVD business, which is perceived to be
attractive because it generates a lot of cash and there is very
little risk in the business.

“Unlike the theatrical production business, the exploitation of DVD
product is relatively predictable,” said one industry insider. “And
since the MGM library encompasses titles with all media rights –
including home entertainment, television, theatrical – investors
would be protected in the event that video-on-demand becomes a
predominant distribution model.”

Time Warner executives are understood to have developed a good
relationship with the partners at Thomas H. Lee through their work on
the Warner Music transaction just a few months ago.

The Time Warner-led talks are taking place while MGM entertains
discussions to be sold to an investor group led by Japanese
conglomerate Sony Corp.

On Wednesday, word leaked out that Sony and two private-equity firms
– Texas Pacific Group and Providence Equity Partners – were
discussing a complex deal in which the group would acquire MGM in a
leveraged buyout, shut down most of the studio’s new production
operations and have Sony distribute the “James Bond” series and other
films from the MGM library on behalf of the new standalone entity.

“This would be a very smart deal for Sony – if it could pull it off,”
noted the industry insider.

“Sony doesn’t have to buy the cow, but still gets the milk for free.”

Meanwhile, talks among Sony’s consortium over structure and valuation
are at a delicate stage and could collapse, sources said.

Other buyout firms including Leon Black’s Apollo Advisors and Bain
Capital have expressed interest about participating in a possible
deal.

From: Emil Lazarian | Ararat NewsPress