In 11th Hour, Murdoch Makes Bid of $1.8 Billion for Historic MGM/UA

In an 11th-hour move, two Rupert Murdoch-controlled companies have made a $1.8-billion bid for MGM/UA Communications Co., which was slated to merge with a smaller Australian company in two weeks.

MGM/UA said that its directors will meet today to consider the offer, made jointly by News Corp. Ltd. and Fox Inc., the parent of rival film studio 20th Century Fox Film Corp. MGM/UA has been asked for a decision within 24 hours, according to one executive familiar with the bid.

Earlier this year, MGM/UA spurned a Murdoch bid in favor of an offer of about $1.6 billion from Qintex, an Australian television network owner that also operates resorts and has a stake in a U.S. television production company that scored a hit last year with the miniseries “Lonesome Dove.”

Other Major Deals

Qintex has been involved in other major deals in Southern California. In July, the company paid about $245 million for two seaside parcels in Dana Point in southern Orange County, where its plans to build at least one resort hotel. Although Qintex owns resorts in Australia and Hawaii, it will be Qintex’s first resort on the U.S. mainland.

MGM/UA recently disclosed that it had haggled with Fox over which side would assume the risk if the deal collapsed beneath antitrust objections. But Fox apparently has not been deterred by antitrust concerns.

“I think (the federal government) will let it go, but they shouldn’t,” said one antitrust specialist, who spoke on the condition that he not be identified.

If the Murdoch bid is accepted, “Fox would have direct operating control of the company within 60 days to 90 days,” according to a memo sent late Wednesday to MGM/UA employees by MGM/UA Chairman Jeffrey C. Barbakow.

To Murdoch-watchers, the last-minute bid underscores his commitment to obtaining more programming for his far-flung entertainment holdings, which include Sky Television, a British satellite-fed television service.

“Financially, it’s a very expensive move. Strategically, its a very good long-term move,” said John Tinker, a securities analyst at Morgan Stanley & Co. in New York. “News Corp. believes that there is an increase in demand worldwide for software. The best way to meet that is to make more movies and to keep building an international distribution pipeline such as Sky Television.”

MGM/UA’s immediate fate will be determined by 72-year-old financier Kirk Kerkorian, who has controlled MGM for the past two decades and acquired United Artists in 1981.

Over the years, Kerkorian has stripped historic MGM of many assets, including the MGM studio lot and the MGM film library. But he has also repurchased some assets, including the MGM name and “roaring lion” logo, which he planned to repurchase after the sale this month to Qintex.

Murdoch’s offer--for the entire company--would end Kerkorian’s whimsical 20-year reign. But, according to the MGM/UA memo circulated Wednesday, News Corp. and Fox indicated that they “intend to operate the MGM/UA businesses aggressively,” which would mean MGM/UA’s survival as a major film distributor, one insider contended.

Others were more skeptical, citing similar promises when MGM acquired United Artists and when Columbia Pictures merged with Tri-Star Pictures.

“We’ve heard that before at Columbia and with MGM/UA,” the antitrust specialist said.

“They’re telling everybody in the company that they’re intending to run the company, but who knows,” one MGM/UA insider said wearily.

Sale Had Been Expected

MGM/UA’s sale has been expected for nearly 18 months, ever since the company announced that it had received offers from Weintraub Entertainment Group and a family partnership led by former Fox owner Marvin Davis.

After that announcement, a number of companies looked over the MGM/UA assets--including every major studio, with the exception of Columbia Pictures. From other continents, the interested parties included Polygram, Sony and C. Itoh & Co., but MGM/UA eventually settled on Qintex’s offer to pay $20 for each share of common stock.

Qintex’s offer is valued at about $1.6 billion, but the Australian firm would actually spend closer to $600 million after reselling certain MGM assets to Kerkorian.

Qintex Chairman Christopher C. Skase could not be reached for comment Wednesday, but the company’s chief financial officer, John Lloyd, said the company is weighing its options.

Can Call Off Merger

It would appear that, unless it raises its bid, Qintex’s options are few. Under the terms of the agreement, MGM/UA may terminate the merger if it finds a more “financially advantageous transaction,” so long as it pays Qintex a fee of $18.2 million--less than the $20-million fee that MGM/UA’s Barbakow is set to receive if the company is sold.

Elsewhere in Hollywood, news of Murdoch’s bid was greeted with the usual cynicism and black humor. One rival studio executive recalled that Murdoch threw a party for Skase in May to introduce him to the creative community. “Everybody in town was there,” the executive recalled.