Metro-Goldwyn-Mayer Inc. has put itself up for sale and hired investment banking firm Goldman Sachs to solicit bids that are due this week, according to sources with knowledge of the auction.
MGM, which is controlled by billionaire Kirk Kerkorian, is looking for a price of $7 billion or more for the legendary studio, which is valued on Wall Street at about $5 billion.
Most of the major studios are interested in MGM's vast film library, which includes the Pink Panther and James Bond movies. MGM's 4,100 movie titles could help Viacom Inc. feed its Showtime movie channel, or Walt Disney Co. shore up its weak live-action film library.
But none of the studios are believed to have submitted a bid, concerned that the price is too steep, according to sources. In addition to Viacom and Disney, the potential bidders include Vivendi Universal, News Corp. and AOL Time Warner Inc.
Neither these companies nor MGM Chairman Alex Yemenidjian would comment Monday.
MGM's current management team has tried to use the company's film library to expand into the cable business. A year ago, MGM paid Cablevision Systems Corp. $825 million for a 20% stake in its four national cable channels, which include American Movie Classics and Bravo.
But analysts say MGM lacks the scale to compete against the media giants that have come to dominate the entertainment industry over the last decade. Led by AOL Time Warner, these conglomerates control both film and television production and cable and broadcast distribution outlets.
Kerkorian, 84, has been one of the few holdouts in the recent merger frenzy, though sources say he has made a merger deal a priority for MGM. Worth $5.3 billion, Kerkorian is looking for a tax-free stock transaction that would give him a stake in the acquirer.
In recent months, MGM's management team has conceded that remaining independent no longer may be realistic.
Yemenidjian has had conversations with potential partners, including Sony Pictures Entertainment and DreamWorks SKG, according to company sources. Late last year, MGM thought it was close to merging with Sony Pictures Entertainment until Sony Corp. Chief Executive Nobuyuki Idei nixed the proposal.
Kerkorian is seeking at least $30 a share for the company, according to several Hollywood sources. On Monday, MGM's shares closed at $19.88, down 50 cents on the New York Stock Exchange.
But Kerkorian may have trouble getting that kind of a premium because many potential buyers are stretched thin. Disney is struggling to justify to Wall Street the record $5.2 billion it paid in November to buy Fox Family Worldwide, owner of the newly renamed ABC Family cable channel. AOL Time Warner is facing a $6.75-billion purchase of a stake in AOL Europe and an even more expensive buyout of AT&T's 25% of HBO, Warner Bros. and various cable systems.
Kerkorian, who controls about 80% of MGM, bought the company for a third time in 1996 when he led a $1.3-billion buyout from Credit Lyonnais. The French bank auctioned off MGM after seizing the studio in 1992 from Italian financier Giancarlo Parretti, now under indictment for allegedly acquiring the company through sham transactions.
Kerkorian first acquired MGM in 1969, selling it in 1986 to Ted Turner. But he reacquired most of the assets when Turner became financially squeezed in the deal, although Turner kept 300 films including "Gone With the Wind."
Since reacquiring MGM six years ago, Kerkorian has pumped about $4 billion into the company, acquiring Orion Pictures, the film library of PolyGram Pictures and providing funds for the studio.
In 1999 MGM agreed to pay Warner Bros. more than $225 million to end a video distribution agreement and regain control of its post-1996 library, including such titles as "Rain Man" and "Thelma and Louise."