Associated Press
July 1 2004

Reports: Time Warner Enters MGM Bidding
Bidding War Said to Break Out for MGM, With Time Warner Offering $3B
in Cash, Stock for Studio

LOS ANGELES July 1, 2004 – A bidding war has broken out for
Metro-Goldwyn-Mayer Inc., with Time Warner Inc. offering about $3
billion in cash and stock for the venerable Hollywood studio plus the
assumption of $2 billion in debt, according to newspaper reports.
The New York Times and The Wall Street Journal reported in Thursday
editions that Time Warner has made a preliminary offer for MGM that
rivals overtures from Sony Corp. The reports valued the deal at $13
cash per share for public shareholders, plus the assumption of nearly
$2 billion in MGM debt. Majority shareholder Kirk Kerkorian would get
$11.50 a share in Time Warner stock under the deal, The Times said.

A spokeswoman for MGM and a spokesman for Time Warner both declined
to comment.

The reports of the rival bid for MGM sent the company’s shares up 56
cents, or more than 4.6 percent, to close at $12.66 in heavy trading
Thursday on the New York Stock Exchange. Time Warner’s shares fell 17
cents to close at $17.41.

MGM chairman and chief executive Alex Yemenidjian alluded to a
bidding war during a presentation Tuesday to shareholders at the
Beverly Hills Hotel. “We have more strategic alternatives available
to us than we realized,” he told about 100 shareholders.

MGM, famous for “The Wizard of Oz” and the James Bond and the Pink
Panther series, has been in talks with Sony for months over a sale
for roughly the same price. MGM continued talks with Sony even after
a 15-day exclusive negotiation period expired in late May.

Under that proposed deal, Sony would contribute about $1.5 billion of
the $3 billion in cash needed to close the deal. The rest would come
from Sony’s financial partners, which include Texas Pacific Group and
Providence Equity Partners.

Sony has not been able to close the deal due to a snag with its
partners on financing terms. At issue is how soon the partners would
be bought out of their investment by Sony, sources familiar with the
talks have said.

Billionaire Kirk Kerkorian owns 74 percent of MGM, which is being
courted primarily because of its vast film library of more than 4,000
titles.

A bid from Time Warner could raise warnings flags with antitrust
regulators since the giant media company already owns Hollywood
powerhouse studio Warner Bros.

A strong bid from Time Warner would also mark a return to the
deal-making table for the media giant after several years’ absence.
Time Warner has spent the last few years repairing its balance sheet
and reorganizing its management and corporate structure following the
disastrous merger with America Online in 2001.

In recent months, the company has been carefully considering new
deals, including a possible offer for cable systems owned by
now-bankrupt Adelphia Communications Corp.

Time Warner remains hampered in its deal-making by a continuing
investigation into its accounting practices by the Securities and
Exchange Commission, placing limits on its ability to issue new
securities.