Viacom May Buy Half of MGM Studio : Deal Would Assist Ted Turner in Paying for the Movie Maker

Cable-television entrepreneur Ted Turner, seeking to make MGM/UA Entertainment financially digestible when he completes his $1.5-billion purchase, is negotiating to sell half of its Culver City movie studio and other assets to Viacom International, a diversified communications concern in New York.

Viacom, which sketchily disclosed the negotiations in a stock registration filing with the Securities and Exchange Commission about some cable-television acquisitions, said it might buy “one or more of the businesses of MGM,” including 50% of the studio and certain distribution rights.

However, it said the discussions do not involve the MGM film library or film-processing laboratory and no assets presently owned by Turner. Viacom declined to disclose figures on the potential deal.

However, for two weeks there have been reports of some type of Viacom-Turner deal brewing that could bring Turner more than $200 million and fit Viacom’s ambitions to enter the film business. In addition, there has been widespread talk for several months of Viacom itself being an attractive takeover target.

Both Would Benefit

Thus, the Viacom-Turner negotiations hold the promise of helping both companies deal with their needs: Besides helping Turner Broadcasting System cope with the debt that it is taking on to acquire MGM/UA, a major deal could get Viacom into films and increase its debt to help discourage takeover moves.

A Turner Broadcasting spokesman, who said the completion of the MGM purchase from financier Kirk Kerkorian and the company’s other shareholders is still expected in mid-December, said he could not comment on the Viacom negotiations “because we are in registration.”

However, Turner said in its own public registration statement recently that it might sell some assets because its expected cash flow after buying MGM/UA would be insufficient to service its debt.

Viacom’s registration outlined an offering of 2.5 million shares of its common stock. The proceeds, according to a company news release, will be used to repay a portion of the financing on its planned acquisition of 50% of Showtime/The Movie Channel and 66% of MTV Networks.

The news release did not mention Turner or MGM. However, a section of the registration statement, entitled “Potential Transactions,” did.

It also mentioned that the company, “together with a group of six others,” has expressed interest in acquiring Group W Cable from Westinghouse Broadcasting & Cable.

If a deal were to go through, the Group W Cable properties would be divided among the group, whose other members were not listed, according to the statement.

Viacom said that, although it believes that it could acquire either the MGM interests or the Group W Cable systems without needing to increase its credit lines, it could not proceed with both transactions without “substantial new financing.”

Just last week, Viacom said it had signed an eight-year, $1.025-billion revolving credit agreement with nine banks led by Morgan Guaranty Trust of New York.

Aside from its Viacom talks, Turner Broadcasting has been discussing the sale of some of its existing assets.

One major negotiation is to sell part of its Cable News Network to NBC News. However, NBC on Thursday denied a published report that it already has agreed to buy 50% of the network.

NBC News President Lawrence K. Grossman said: “If that’s true, it’s news to me. . . . There’s nothing that’s been signed, sealed, delivered or settled.”

Turner also stands to receive $480 million for reselling the United Artists subsidiary of MGM/UA back to Kerkorian simultaneously with the closing of the MGM/UA purchase.

Under present negotiations, Viacom could become part owner of the joint MGM and UA film distribution company that will be set up after Turner becomes owner of MGM.