Sony Pictures Entertainment and Comcast Corporation officially announced their buyout deal for 007 studio MGM had been accepted in principal - worth $2.85 billion in cash.

MGM Accepts Sony Buyout Deal
14th September 2004

James Bond is on his way to a new owner. On Monday 13th September 2004, Sony Pictures Entertainment and Comcast Corporation officially announced their buyout deal for 007 studio MGM had been accepted in principal. After months of secret talks and media leaks, Metro-Goldwyn-Mayer has agreed to the deal worth $2.85 billion in cash. MGM said the buyers had put down a deposit of $150 million, and added that management would likely recommend approving the proposed deal to its board of directors by September 27th 2004.


Emerging as victor in a drawn-out acquisition battle with Time Warner Inc, Sony will join forces with MGM to create the world's largest film library of about 7,600 titles, comprising some 3,500 movies from Sony and about 4,100 from MGM.

Sony will pay $12 cash per share for MGM, controlled by billionaire Kirk Kerkorian, and assume about $2 billion of debt.

With roughly 237.6 million MGM shares outstanding at the end of July, the total value of the deal is about $4.85 billion. Sony, which bought Columbia Pictures in 1989 for $3.4 billion, will control the MGM venture. Comcast will manage the joint venture the two concerns will form for cable TV.

Press Release
PHILADELPHIA, Sept. 13 2004 - Comcast Corporation and Sony Pictures Entertainment announced today that Comcast, Sony Pictures Entertainment and the equity partners in the MGM transaction have reached agreement on a broad programming and distribution arrangement. It will allow for the distribution of Sony Pictures' and MGM content on Comcast's Video on Demand (VOD) platform, and for the creation of a joint venture, to be managed by Comcast, establishing new cable channels featuring Sony and MGM content. While this agreement contemplates consummation of the acquisition of MGM, the parties will proceed with Sony content on a stand alone basis for VOD under any circumstances.

Time Warner, the world's biggest media company, were named the favourites to take over MGM by industry experts up until yesterday, when the media giant pulled out of the race and took their $4.6 billion offer off the table after Sony sweetened it's proposal.

MGM, the 80-year-old studio that owns the James Bond movies, said that the unit of Japanese electronics giant Sony Corp would be joined by Providence Equity Partners Inc., Texas Pacific Group and DLJ Merchant Banking Partners. Sony said it had reached a separate agreement with the top U.S. cable TV operator, Comcast Corp. for Comcast to offer Sony and MGM movies over its video-on-demand systems and on new cable channels that it would form with the Sony group.

"We are very pleased with these new content agreements, which confirm the value of our scale and distribution platform," said Brian L. Roberts, Chairman and Chief Executive Officer of Comcast Corporation. "This represents our first major studio deal for VOD content and will enhance the attractiveness of our VOD platform. The agreement also provides us with some very interesting channel creation opportunities."

"This will obviously help diversify earnings and it's an important library, an important source of content," said Marc Desmidt, head of Japanese equities at Merrill Lynch Investment Managers in Tokyo. "But I've got no idea (right now) if they've overpaid or not -- whether it's the right price."

MGM's film library is considered an industry gem, generating a stream of revenue in the DVD market. Sony could also harvest the MGM library for sequels, and MGM's trademark Leo the Lion is a globally recognized brand. Including the titles owned by Sony Pictures Entertainment, the Sony group will now control about 40 percent of all movies ever produced by Hollywood, according to some estimates.


What Does This Mean For 007?

Ongoing MGM film and television productions are expected to complete "as is", but the MGM brand will be retired on any new projects after 2005.

Trade paper Variety has reported that the "James Bond franchise will be negotiated under a separate deal with the Broccoli family" and the Bond series will be handled uniquely, still releasing films under the familiar "Leo The Lion" roaring MGM logo.

Despite most 007 fansites reporting the deal as done, the MGM board still have to sign-off on the buy-out, which could take a further two weeks. Worse still, sources believe that the deal will take about six months to close because of legal constraints; until that time MGM and Sony must operate separately. As Bond 21 could be considered a "new production", official announcements on the film may now be stalled until the Sony deal has been completed.

Due to Sony's past interest, and attempts to create a rival James Bond series, industry watchers expect the studio to give 007 a new lease of life for the 21st century. MGM granted "Die Another Day" a reported budget of $142m, whereas Sony has been known to splash around even larger cash sums, such as $200m for "Spider-Man 2". Contrary to earlier reports that Bond 21 was to have a smaller production than "Die Another Day", sources say Sony are likely to bank-roll an even bigger budget for 007's next adventure.

- Cindy Macdonald