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Time Warner still mulling MGM bid as deadline passes

March 19, 2010 |  7:40 pm

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The fate of Metro-Goldwyn-Mayer Inc. is still in limbo.

While bids for the troubled studio were due Friday, front-runner Time Warner Inc. was still mulling an offer late in the afternoon and it was unclear if, and when, the media company was going to bid, according to a person close to the matter. Two knowledgeable people said that if Time Warner, which owns Warner Bros. studio, did make an offer, it was expected to be under $1.5 billion.

It's possible that MGM has been forced to extend the deadline for final bids as Disney recently did with its Miramax Films unit, which is also up for sale. But as of Friday evening there was no official word and a spokeswoman for MGM didn't have any comment.

The field of prospective buyers for both studios has dwindled in recent weeks as the valuations being put on the properties came into question. John Malone’s Liberty Media and hedge fund Elliott Associates dropped out of the auction for MGM as Friday's deadline for binding offers approached; earlier Summit Entertainment and investment firm Qualia Capital bowed out of the running for Miramax.

Other expected to bid for MGM are industrialist Len Blavatnik's Access Industries and Lions Gate Entertainment, but it couldn't be determined if they had submitted bids yet. Early Friday morning, Carl Icahn launched a hostile takeover bid for Lions Gate and wants to block the company from buying MGM. Lions Gate had no comment but last week Vice Chairman Michael Burns said in an interview with The Times that, "We never pay retail for any asset."

It is unclear whether the bids expected to be submitted will be enough to appease MGM’s 150 creditors, who are said to be seeking at least $2 billion. Consequently, many believe the debt holders may call off the sale and opt for a plan to restructure MGM’s $3.7-billion debt and seek new capital -- or, as a last recourse, force the company into bankruptcy.

There are at least two alternative plans in the wings, including one from Twentieth-Century Fox parent News Corp. and another from Qualia Capital, a media investment fund run by Amir Malin and Ken Schapiro.

For several weeks, prospective buyers have been privately complaining they've been unable to get detailed financial information from MGM. Several suitors said that the more data they get, the more grim MGM’s prospects appear. They say that current cash flow from the studio's film library of about 4,000 titles is no more than $250 million — about half of what it was a few years ago — with future projections declining.

-- Claudia Eller

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