MGM Stock Up on a Report of Potential Suitors

MGM/UA Communications created a stir Monday with the announcement that it has received inquiries from several interested buyers. But the identities were not divulged, nor would the company say just how recently the inquiries were made.

The company’s stock jumped $3 a share to close at $12 on a volume of 259,800 shares on the New York Stock Exchange. About 82% of the company is controlled by 70-year-old financier Kirk Kerkorian, who paid $9 per share when he bought the former United Artists Corp. two years ago to form the present company.

MGM/UA Chairman and Chief Executive Lee Rich said Monday’s disclosure was prompted by the New York Stock Exchange’s requirements that Kerkorian and top management “at least inform our stockholders and our board” of overtures from interested buyers.

Rich said “there have been several inquiries” in the past, but he declined to specify the time period. He noted that the company’s directors were already scheduled to meet today and said that a special committee would be established to weigh such offers.

Losses for Year

Rich said he did not expect the directors to “even talk about any specific inquiry” at today’s board meeting, although he later amended his remarks to say: “We don’t know yet. Whatever comes in front of the board we will discuss.”

The MGM chairman said Kerkorian is not expected to serve on the subcommittee that will weigh inquiries from potential buyers.

MGM’s 15-member board includes such outside directors as television host Arthur G. Linkletter, RJR Nabisco Vice Chairman Edward A. Horrigan Jr. and corporate lawyer Frank Rothman, who once ran MGM/UA Entertainment for Kerkorian until the financier sold that company to Turner Broadcasting System in 1986 and immediately repurchased UA for $480 million.

With his purchase of UA, Kerkorian also regained such MGM assets as the “Metro-Goldwyn-Mayer” and “MGM” names and logos and all the television and motion picture projects then in development or scheduled for release.

As of Nov. 30, the Beverly Hills company had taken on $464 million in debt. For the year ended Aug. 31, the company posted losses of $88 million, compared to earnings of $17.9 million in the previous year, which included an extraordinary gain of $1.3 million.

At least one analyst, Roy Hong of First Boston Corp. in New York, has predicted losses for two years while the company is expanding its production, and he advised clients to hold the stock when the price was ranging from $6.75 to $7.375 as a speculative investment.

MGM/UA’s film library contains about 950 motion pictures, including 14 “James Bond” features, the “Rocky” series and a number of Woody Allen classics. The company has continued to operate two motion picture production units, with a stated goal of producing a total of 16 to 20 movies a year.

MGM’s “Moonstruck” has been nominated for six Academy Awards, including best picture, while United Artists’ “Bright Lights, Big City” opened Easter weekend in 1,196 theaters, selling nearly $5.13 million in tickets, making it the industry’s third-biggest grossing film for the weekend. The company’s television series include the critically acclaimed “thirtysomething” for ABC, and “In the Heat of the Night” for NBC.