MGM/UA Communications, which confirmed reports that it had agreed to sell its MGM motion pictures division, said Monday that it is reviewing offers to buy the remainder of the entertainment company.
"We are considering offers being made for a portion of MGM/UA," said President Stephen D. Silbert, who would not provide any further details on the offers.
But Silbert said investor Kirk Kerkorian, who owns 82% of MGM/UA, intends to retain majority ownership of the firm if any offers should be accepted. "He has no plans to affect his majority ownership of MGM/UA," Silbert said, who added that Kerkorian intends to keep at least a 50% stake in the firm.
Kerkorian was not available for comment.
Under the sale announced Monday, MGM will be spun off into an independent company involved in television and motion picture production. MGM/UA will be renamed United Artists, which will be involved in motion picture production and distribution and own a 950-film library. Both United Artists and MGM will end up owning half of a movie distribution company.
At least 25% of MGM will be owned by a company controlled by investor Burt Sugarman and movie producers Jon Peters and Peter Guber. Guber will become chairman of MGM and Peters will join him as president. The group will get to select half of MGM's board of directors.
In a complex deal, a Kerkorian-controlled company will end up owning about 57% of MGM. The remainder will be owned by the public.
The sale of MGM to stockholders should raise about $400 million. Of that amount, $100 million will be given to MGM and the remainder will be used by United Artists to pay $230 million in bank loans. United Artists, however, will still carry $400 million of other debt, such as bonds, on its books.
"We think it will results in a much stronger UA and a much stronger MGM," Silbert said. He disputed reports that MGM/UA was having trouble obtaining bank loans. "We just got a new line of credit two or three weeks ago," Silbert said. "We have all the financing in place that we need."
The deal was applauded by financial analysts, who said it will allow Kerkorian to hold onto United Artists' valuable film library--which includes "Rocky" and "Pink Panther" series--as well as its film production and distribution divisions. At the same time, he will be able to reduce the company's debt.
The sale, which is expected to be completed later this fall, comes two years after MGM's 3,000-film library was sold to Turner Broadcasting Systems for more than $1 billion. The studio's Culver City lot was sold soon afterward to Lorimar Telepictures.
"If you review Kerkorian's history when he's ever bought or sold his companies, he always got a good deal," said Paul Marsh, an industry analyst at Fahnestock & Co., a brokerage firm.
The sale is a major move for Guber and Peters, who have produced such films as "The Witches of Eastwick," "The Color Purple," "Innerspace" and "Midnight Express." Both will take control of MGM as the legendary film studio struggles with losses, despite such recent successes as the movie "Moonstruck" and the television show "thirtysomething."
"It propels them into a bigger league," said Harold Vogel, an industry analyst at Merrill Lynch Research. "Managing MGM is a higher profile and more visible than what they were doing before."
Some Problems Noted
Last December, Guber and Peters merged their independent movie production house into Barris Industries, a television production and syndication firm owned by Sugarman. Barris is known for such shows as "The New Dating Game," and "The New Newlywed Game."
"We've taken our creative energy and translated it into economics," Guber said of his past theatrical success. Now, Guber and Peters want "to bring a similar result to this company. We are then betting on ourselves," Guber said.
"We're in the throes of looking at production, personnel and the infrastructure of the company," Guber said. "Obviously, the company has had some problems."
It was not clear what role Alan Ladd Jr., chairman of MGM Pictures, will play in an independent MGM. "He's under contract with MGM," Guber said of Ladd. "We feel he is a top flight film maker."
Still, Guber said "we have to see where are all the pieces fit together."
The agreement to run and own a part of MGM fulfills a longtime desire of Guber.
"I remember walking down the center of Gower Studios and my comment was 'wow what a trip,' " Guber said of his first days in Hollywood. "What I recognize now is that the 'wow' is being in control of the trip."