MGM/UA May Spin Off a Film Studio : Firm Considering Rights Offer to Its Shareholders

Financier Kirk Kerkorian is tinkering with MGM/UA Entertainment Corp. again, and a spokesman on Tuesday insisted that the main focus is on the feasibility of spinning off one of its two movie studio subsidiaries to the public holders of 49.9% of its stock.

But the loss-wracked Culver City film concern also has made it a matter of public record that possibilities under exploration extend as far as sale of both of its movie studio subsidiaries, Metro-Goldwyn-Mayer Film Co. and United Artists Corp.

On the New York Stock Exchange on Tuesday, MGM/UA’s stock initially rose 37.5 cents to a new 52-week high of $15.25, but the issue ended the session at $14.75, down 12.5 cents for the day.

Kerkorian, who controls MGM/UA with 50.1% ownership, has been the subject of recurrent speculation about his intentions since last December. At that time, the company decided to reacquire a 15% public share in its burgeoning subsidiary, MGM/UA Home Entertainment Group.

Studying Ownership Change

Although Kerkorian’s spokesman said that “nothing is for sale,” MGM/UA now has confirmed that it is studying possibilities of a major ownership change.

The disclosure was made not in any report or announcement by the parent but in the New York-based pay-television and home-video subsidiary’s proxy for its June 14 annual meeting.

The chief business before the meeting: a vote on ratification of a merger with MGM/UA that will cost the parent firm $128 million to buy back the public shares and about another $15 million to finance it.

A brief paragraph in the 85-page proxy covers the subject:

“Various proposals have been considered from time to time with respect to MGM/UA. In May, 1985, MGM/UA began to explore various proposals, including the possibility of restructuring MGM/UA and selling Metro-Goldwyn-Mayer Film Co. and/or United Artists Corp. (including through a rights offering to stockholders). Although no assurance can be given that any such transactions will take place, the merger could facilitate any such transactions.”

Stephen D. Silbert of the Wyman, Bautzer, Rothman, Kuchel and Silbert law firm, who is Kerkorian’s spokesman, added in an interview that “basically, it is at the exploration stage, to see the possibility of splitting up the two companies . . . to see if it makes business sense and whether it would be good for the stockholders.

“What we’re talking is a shareholders’ rights proposal--spinning off one of the companies to the shareholders. The thing to emphasize is that nothing is for sale. What we are taking the hardest look at is giving shareholders pieces of paper representing two different companies rather than owning one company.”

By such a move, of course, Kerkorian would retain control of the two separate public companies.

Kerkorian took a similar step in May, 1980, dividing the original MGM into two publicly traded entities, the Culver City movie studio and the Nevada gambling resort operator MGM Grand Hotels Inc. The film firm bought United Artists in 1981 and changed the parent’s name to MGM/UA Entertainment.

Then, in December, 1983, Kerkorian launched a plan to buy out the public shareholders for several hundred million dollars in cash and notes, only to abort the proposal three weeks later.

The movie firm has been plagued by red ink, including a net loss of $82 million in its latest reported quarter blamed on poor box-office results. Just before the results were announced, Frank Yablans resigned as its chief operating officer. Alan Ladd Jr. has replaced him.

In the midst of these events at the movie concern, Kerkorian last fall increased to nearly 73% his holding in MGM Grand Hotels from his former 50.2% stake. That company operates major hotel-casinos in Las Vegas and Reno. In recent months, there have been a number of published rumors in Las Vegas that Kerkorian was contemplating purchasing another casino there, the Aladdin hotel-casino.

Asked about the matter Tuesday, Silbert said: “Nothing is going on.”