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MGM for sale but price is high

Disney and other potential bidders reportedly think $7 billion is too steep.

By SALLIE HOFMEISTER, CLAUDIA ELLER and JAMES BATES
BUSINESS REPORTERS

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LOS ANGELES - 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 close to 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 currently 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 Corp. feed its Showtime movie channel, or Walt Disney Co. shore up its live-action film library.

But none of the studios is believed to have submitted a bid, concerned that the price is too steep, according to Hollywood sources.

In addition to Viacom and Disney, the potential bidders include Vivendi Universal, News Corp. and AOL Time Warner. MGM Chairman Alex Yemenidjian would not 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 percent stake in its four national cable channels, which include American Movie Classics and Bravo. But analysts say MGM still lacks the scale to compete against the media giants that have come to dominate the entertainment industry during the past decade.

Led by AOL Time Warner, this handful of media conglomerates have clout in negotiating terms with advertisers and cable operators because they control both film and television production and cable and broadcast distribution outlets. Kerkorian, 84, has been one of the hold-outs 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 acquiring company. In recent months, MGM's management team has conceded to Wall Street that remaining independent may no longer be realistic.

But many potential buyers are stretched thin at the moment. 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.

Walt Disney already has a relationship with MGM through its theme park business. Disney has a licensing agreement to use the MGM name at its studio park in Orlando.

Sallie Hofmeister, Claudia Eller and James Bates are business reporters for the Los Angeles Times, a Tribune Publishing newspaper. Richard Verrier of the Sentinel Staff contributed to this report.

© Los Angeles Times

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