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Time Warner to make $1.5-billion bid for MGM [Updated]

March 22, 2010 |  3:20 pm

[Updated, 5:05 p.m.: Time Warner this afternoon submitted an all-cash $1.5 billion offer for Metro-Goldwyn-Mayer Inc., joining two other known bidders, independent studio Lions Gate Entertainment and industrialist Len Blavatnik's Access Industries. MGM declined to comment on the specifics of the offers other than to say in a statement that the company had received "a number of bids as part of its ongoing process of exploring strategic alternatives, which include continuing to operate as a standalone entity and evaluating a potential sale of the company." MGM said is will evaluate the bids over the next several weeks, while working with its lenders to extend the current forebearance period for paying interest on its $3.7 billion bank debt, which ends March 31, 2010. Additionally, MGM is hoping to strike a forebearance aggrement for its separate $250 million revolving credit facility with JP Morgan Chase, which is due in full on April 8.]

Time Warner Inc. is expected to make a $1.5-billion all-cash offer this afternoon for Metro-Goldwyn-Mayer Inc., according to a knowledgeable person. The media conglomerate and owner of Warner Bros. will join the only other two known bidders for debt-ridden MGM, industrialist Len Blavatnik's holding company Access Industries and independent studio Lions Gate Entertainment, which have already submitted their offers, according to a Reuters report.

MGM had been hoping to get all bids in by last Friday, but the studio unofficially extended the date to Monday because front runner Time Warner was still formulating its offer.

Lions Gate's bid was expected to be well under $1.5 billion, said a person familiar with the matter. It wasn't immediately clear how much Blavatnik had bid. However, people close to the matter said all three bids were well under the $2-billion-plus that MGM's 150 creditors are seeking.

Although the exact amounts of the offers are not binding, the bidders were required to demonstrate how they would finance a purchase of MGM, said a person close to the situation.

Saddled with $3.7 billion in debt and looming interest payments due at month's end, MGM could wind up not accepting any of the bids and opt instead for a prepackaged bankruptcy or Chapter 11 protection. It could also pursue a restructuring plan such as one put on the table by 20th Century Fox owner News Corp., as well as media investment fund Qualia Capital.

MGM's creditors committee is expected to review the bids shortly and figure out how to proceed, a person involved in the process said.

Since MGM was first put on the sales block last fall, a number of suitors have dropped by the wayside, including, most recently, John Malone's Liberty Media and hedge fund Elliott Associates, which backs Ryan Kavanaugh's Relativity Media.

--Claudia Eller
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