Parretti Makes Surprise Offer to Purchase MCA : Buyout: Move could undermine MGM-Pathe chief in Hollywood. It is unlikely to derail Matsushita deal.

In a bizarre move that could undermine his future in Hollywood, MGM-Pathe Communications Co. Chairman Giancarlo Parretti has made a surprise bid to buy MCA Inc., which just accepted a $6.59-billion offer from Matsushita Electric Industrial Co., sources said Tuesday.

Parretti presented the new offer to MCA Chairman Lew R. Wasserman only hours after the Matsushita deal was signed Monday, according to sources at MGM and other sources involved with the MCA-Matsushita deal. The precise terms of Parretti’s offer were not disclosed, but those familiar with the new bid said it probably would not derail the Matsushita-MCA buyout.

It appeared highly unlikely that Parretti--who strained for nearly a year to finance his recent $1.3-billion purchase of the former MGM/UA Communications Co.--could fund an acquisition that was judged too big for some of the world’s strongest corporations.

But, Parretti could complicate the MCA-Matsushita marriage by forcing MCA’s directors to consider whether his bid constitutes a good faith offer in the best interests of shareholders. “This could become a major nuisance,” one individual involved in the MCA buyout said.

Parretti’s offer shocked executives in the tight-knit motion picture community, where personal relationships are a key to forging business deals. The move clearly puts Parretti at odds with powerful forces in Hollywood. It is certain to put a severe strain on MGM’s relations with Wasserman and Creative Artists Agency Chairman Michael Ovitz, widely considered Hollywood’s two most influential executives.

Ovitz assembled the MCA deal for Matsushita and represents a vast stable of stars, directors and writers through CAA. MGM is struggling to rebuild its film business under movie executive Alan Ladd Jr. and depends heavily on CAA-represented talent.

It is virtually impossible to make films in Hollywood without drawing heavily on CAA’s roster, which includes Dustin Hoffman, Robert Redford, Steven Spielberg, Jane Fonda and more than 600 others. MGM’s next big film release is “The Russia House,” which draws much of its selling power from one of CAA’s biggest stars, Sean Connery.

“I would not put him (Parretti) at the top of any popularity contest,” one film executive said Tuesday.

In what was regarded as a lower-than-expected offer, Matsushita agreed to pay $66 in cash for each of MCA’s 92.8 million shares. MCA shareholders will also receive stock in a newly formed broadcasting spinoff that is valued as high as $5 a share.

Some MCA shareholders expected as much as $100 a share for their stock and were bitterly disappointed with the Matsushita offer. However, Wasserman was pessimistic about the economic outlook and, at age 77, was not inclined to hold out.

Parretti could try to rally shareholders behind his bid, but only if he could prove that he had substantial financial backing.

Despite the Matsushita accord, MCA left the door slightly ajar to a higher bid. It said Monday that the company was obligated to pay Matsushita up to $125 million in fees if MCA directors accepted an unsolicited higher offer before the Matsushita deal closes. The Matsushita buyout is expected to be completed by early next year.

Arlene Cattani, a spokeswoman for Parretti, declined to comment on the offer.

MCA President Sidney J. Sheinberg also declined to comment, as did a spokesman for CAA, which represents Matsushita.

One source said Matsushita negotiators were not aware of the counteroffer as of late Tuesday because they were en route from New York to the company’s Osaka, Japan, headquarters.

MCA appeared likely to dismiss the offer unless Parretti proved that he had access to more than $7 billion.

The Italian financier has not fully disclosed the source of his funding for the MGM purchase, which was completed only weeks ago. About $700 million of the purchase price apparently was pulled together from the sale of rights to the MGM film library, while the rest came from European companies affiliated in some way with Parretti, according to his filing on the purchase with the Securities and Exchange Commission.

MCA, with nearly $4 billion in annual revenues, owns Universal Studios and is a major producer of films and television shows. Since its merger with Pathe Communications, MGM’s revenues have not been disclosed. The company is less than one-quarter of MCA’s size and has struggled at the box office in recent years.

Matsushita, with annual revenues of about $38 billion, is the world’s largest manufacturer of consumer electronics. Its purchase of MCA would be the largest takeover ever of a U.S. company by a Japanese firm.

Earlier Tuesday, a member of the French National Assembly, Francois D’Aubert, introduced a resolution calling for an inquiry into lending to Parretti and his associated companies by Credit Lyonnais, one of France’s national banks.

Credit Lyonnais has loaned hundreds of millions of dollars to Parretti-related companies. In a 68-page demand for an investigation, D’Aubert described Parretti as a “disturbed and controversial person” who has had brushes with the law. Parretti was convicted of fraudulent bankruptcy in Naples, Italy, this year and has said he is appealing the conviction.

In the document, D’Aubert called for a commission to examine what risks the bank had taken in lending to Parretti. The Assembly has not acted on the resolution.

Through his spokeswoman, Parretti said the action was “done for political reasons.” He said he has sued D’Aubert for libel in a pending case in French courts.

Parretti’s offer to MCA has highlighted largely ignored provisions in the Matsushita deal that indicate some MCA willingness to entertain new offers. Individuals close to the deal have said no offer other than Parretti’s have surfaced.

In addition to the fee for ending the deal, Matsushita would get an option to buy 16.9 million new MCA shares at $71 if the Hollywood company were sold to someone else. It could reap a $152-million profit on the shares if a new bidder paid $80 a share for MCA.

The most profound impact of the Parretti offer may be on MGM, not MCA. He is already regarded as an outsider in the Hollywood community and the bid is certain to cause ill will.

High-level film executives, queried about the bid, were at a loss to explain it Tuesday. Some expressed the view that Parretti simply wants money--much like “greenmailers” who regularly threatened hostile takeovers in the 1980s, only to drop their bids when company directors agreed to buy out their stock holdings at a premium.

Parretti is not known to own any MCA stock, and financing for such bids is virtually nonexistent. Moreover, MCA has been known for enforcing a strict policy against such payments.

Others speculated that Parretti was trying to bolster his reputation as a “player” on Hollywood’s corporate scene. Yet, one Parretti associate insisted Tuesday, “He really doesn’t care (what Hollywood insiders think). Because not one of those people backed him. He’s a lone man in the wind.”

One of the biggest losers in any all-out war over the bid would almost certainly be Ladd, the popular executive Parretti hired last year to give his company respectability.

One top film executive went so far as to say that Ladd might leave MGM if the bid generated serious backlash. Ladd declined to comment.

Word of the Parretti offer did not circulate widely Tuesday. MCA stock edged up 62.5 cents, to close at $65.75 a share in New York Stock Exchange trading, reflecting investor confidence that the Matsushita deal would be completed.