MGM / UA Concealed Deal, Dissident Claims

MGM/UA Entertainment, which has been trying to repurchase the 15% stake of MGM/UA Home Entertainment Group that it doesn’t already own, was accused Wednesday of concealing a deal it allegedly reached last week to increase its offer to a cash value of $30 per share.

The accusation came in an amended lawsuit filed in U.S. District Court in New York by Sumner Redstone, a dissident shareholder of the home entertainment company who controls nearly 7.8% of its shares.

The lawsuit seeks to prevent MGM/UA from voting its shares in the home entertainment company in favor of the merger or taking any action to consummate the deal.

The allegation came on the heels of MGM/UA’s offer Tuesday to give notes in exchange for the home entertainment firm’s shares. The notes, which would mature in 1993, carry a nominal face value of $34, but analysts said the current discounted cash value is about $27.50.

Breach of Agreement

In court documents filed Wednesday, attorneys for Redstone contend that MGM/UA breached an agreement made Thursday, March 28, to pay a current value of $30 per share to all public shareholders of the home entertainment company, or about $38 of face value in MGM/UA notes, subject to adjustment.

Redstone’s suit alleges that MGM/UA issued a series of news releases March 28, culminating in an announcement that it had reached an “agreement in principle” to settle an earlier lawsuit filed by Redstone. MGM/UA then failed to announce the terms of the deal and offered a lesser price April 2, according to Redstone’s lawsuit.

MGM/UA Entertainment Chairman Frank Rothman could not be reached for comment late Wednesday on the allegations in the amended complaint. Earlier in the day, however, Rothman told The Times that “no agreement” had been reached with Redstone last week. In response to a reporter’s questions, Rothman said that “only negotiations” took place, and the MGM/UA chairman added that the two parties were no longer negotiating.

2.3 Million Shares

Redstone is president of National Amusements Inc., a movie-theater exhibitor based in Dedham, Mass. Redstone and National Amusements together own about 2.3 million shares of the home entertainment company.

The lawsuit, filed on behalf of Redstone and National Amusements, named as defendants MGM/UA Entertainment; its majority shareholder, Kirk Kerkorian, and Kerkorian’s private investment company, Tracinda Corp. MGM/UA Home Entertainment Group and its directors also were named.

In a brief telephone interview, Redstone said that, despite the lawsuit, he has not decided how he will vote his shares at the home entertainment company’s shareholders meeting tentatively scheduled for late May.

“We’ve made no decision as to what we’re going to do with the stock,” he said, but he expressed the view that “every Home Entertainment Group shareholder is entitled to . . . $30 (of real value) per share . . . in view of what’s taken place.” Redstone added that he personally negotiated with MGM/UA last week with the express understanding that “we would not make a deal that was not for everybody.”

MGM/UA has sweetened its offer twice since mid-December, when it first announced its plan to repurchase the home entertainment company’s outstanding public shares, which it sold two years ago when it spun off the company.