MGM/UA Communications Co., a major movie and television studio, is expected to sell its Metro-Goldwyn-Mayer Pictures unit in a complex spinoff under which investor Burt Sugarman and movie producers Jon Peters and Peter Guber will end up with 25% of the company, according to industry sources.
Investor Kirk Kerkorian, who owns 82% of MGM/UA, will personally buy the balance of the unit after first offering its shares to shareholders of the parent company.
The cash value of the deal was not immediately clear and details reportedly were still being worked out over the weekend. One source familiar with the transaction said MGM/UA will use the cash it raised to help pay debt or fund future movies and television projects.
MGM/UA Chairman Lee Rich declined to comment on the transaction, and the Sugarman group did not return calls. An announcement, however, is expected as early as Monday.
MGM/UA had previously said it was entertaining offers for all or part of the studio. Sony Corp. had been among several potential buyers said to be interested in the studio, raising the prospect that a Japanese company would make its first entry into Hollywood.
Apparently, the new company would include MGM's famous lion logo and its movie and TV production unit. One source said Kerkorian had been asking about $200 million for the MGM unit and roughly $1 billion for the whole company, prices that some prospective buyers had considered high.
At Friday's $15.75-per-share closing price for MGM/UA stock, the company's 50 million shares were valued at $787.5 million. As rumors that Sugarman was buying the MGM unit spread through Hollywood, MGM/UA stock rose nearly $1 on the New York Stock Exchange.
MGM's 3,000-film library had already been sold to Turner Broadcasting Systems Inc. for more than $1 billion in 1986, and the studio's Culver City lot was subsequently sold to Lorimar-Telepictures Corp.
It appears that shareholders in the parent company would continue, at least for the time being, to own the studio's United Artists unit, along with its 950-film library, which includes the "Rocky" and "Pink Panther" films.
Earlier this year, Giant Group Ltd.--a Beverly Hills-based holding company controlled by Sugarman--failed in a fiercely contested effort to take over Media General, owner of newspaper and broadcast stations, for about $1.8 billion.
The 47-year-old investor became associated with Guber and Peters last December, when he merged Barris Industries Inc.--a TV production and syndication firm he headed--with a private, independent movie production company owned by the two producers.
Barris is best known for its popular shows "The All New Dating Game" and "The New Newlywed Game." Guber and Peters have produced a number of films, including "The Witches of Eastwick," "The Color Purple," "Innerspace" and "Midnight Express," and are counted among Hollywood's wealthier independent producers.
At the time of the merger, Peters said, "I want to build another MCA," referring to one of the entertainment industry's largest conglomerates.
For MGM/UA, the spinoff would resolve only part of the uncertainty that has plagued the company since Kerkorian earlier this year announced his planned restructuring, only the latest in a long string of such moves.
It wasn't clear, for instance, whether the spinoff would keep MGM's production team, which is headed by veteran executive Alan Ladd Jr., nor whether Kerkorian would continue to try selling the United Artists unit. United Artists appears to account for the largest part of the parent company's value because of its film library.
Despite some successes--including the movie "Moonstruck" and the TV series "thirtysomething," both produced by the MGM unit--the company has been plagued by losses and is said to have exhausted much of the cash it had available to fund new films and programs.
For the nine months ended May 31, MGM/UA lost $10.8 million compared to a loss of $41.9 million in the same nine-month period a year earlier.