Prospects for Turner-MGM Deal Get a Lift

Turner Broadcasting System will file by Thursday an updated securities registration for its $1.45-billion acquisition of MGM/UA Entertainment, a source close to Drexel Burnham Lambert said Tuesday. The New York investment banking firm is arranging Turner’s financing for the purchase.

Even though the prospectus is expected to be little changed, such a filing with the Securities and Exchange Commission would represent another positive statement about the status of the MGM deal by Drexel Burnham following delays and adverse rumors affecting the movie company’s stock price.

MGM/UA’s stock slipped another 12.5 cents a share Tuesday to close at $22.125 in New York Stock Exchange composite trading. It was the lowest closing price for MGM/UA stock since last August, just before Turner agreed to pay $29 a share for MGM/UA stock.

Terms were revised last October from all cash to $25 cash and one share of a new issue of Turner preferred stock for each MGM share.

Rumors have persisted on Wall Street that the financing might be in trouble. In a Turner filing Dec. 19 of a combined MGM/UA proxy and a Turner prospectus, the Atlanta-based broadcaster said it intended to raise $125 million more on the sale of securities than was outlined in an October filing. Nothing has changed in the projected financing since then, according to the source.

Companies must file prospectuses before issuing new securities, in this case the new preferred stock.

MGM/UA’s proxy material has not yet been cleared by the SEC, but such clearance is considered possible by the end of this week, the source said. MGM said last week that it will reschedule a special stockholders meeting to vote on the merger about 20 days after it receives permission to mail the proxy material. Financier Kirk Kerkorian has given Turner a proxy to vote his 50.1% of MGM/UA stock, assuring approval of the merger.

The updated Turner filing is expected to include some figures on a “substantial loss” for MGM’s first fiscal quarter ended Nov. 30, which was indicated in the Dec. 19 filing.