MGM Subject of Sale Talks, Sources Say

Representatives of financier Kirk Kerkorian have held informal talks with News Corp. and Walt Disney Co. about a possible sale of the Metro-Goldwyn-Mayer film studio the billionaire controls, sources said.

But they added that the talks are very preliminary and may not amount to more than “tire kicking” to see what MGM assets Kerkorian is willing to sell.

A spokeswoman for News Corp.’s 20th Century Fox unit said the company is not in talks about acquiring MGM. A spokesman for Disney declined comment.

In a statement, MGM said it is considering various strategic alternatives and potential business combinations “in connection with its goal of becoming an integrated global entertainment company.” It added that any discussions “are preliminary in nature and no assurance can be given as to the outcome of such discussions.”

Still, it does show Kerkorian may be losing patience with the loss-plagued studio, which he acquired for $1.3 billion in 1996, and could cut his losses sooner than later.

At the time he bought it, skeptics predicted that Kerkorian might eventually “flip” the studio, selling it within a few years rather than continuing to build it. MGM lost $55 million in the second quarter and announced then that it planned to raise $250 million in a securities offering because it is generating cash more slowly than expected from television and home video operations.

People close to MGM Chairman Frank Mancuso said the executive is disheartened by the latest development, although they added that he has no plans to leave.

MGM’s most valuable assets to any potential buyer would be its 4,000-title film library, 6,700-title video library, famed lion logo and lucrative James Bond franchise.

The development comes amid a round of belt-tightening at the studio, including shaving its film production as well as putting on hold television program development.

MGM is badly in need of more hit films and TV shows. It scored a major hit with the James Bond film “Tomorrow Never Dies” and had another profitable film in “The Man in the Iron Mask.” But it also has been hurt by such box-office duds as “Species II” and “Dirty Work.”

Nearly given up for dead during the early 1990s, the studio launched a comeback, which helped facilitate its 1996 sale to Kerkorian, who had owned the studio twice before.

In a Securities and Exchange Commission filing this week, MGM warned that the company’s short-term cash flow will be hurt by its unsuccessful film releases. MGM also said it spent heavily to accelerate production of its films because of the threat earlier this year of a potential Screen Actors Guild strike. That cloud has since been lifted.

Although MGM said it should have enough funds through 1999, the failure of one or more films would hurt its liquidity, which could force further reductions in cash needs, the seeking of additional financing, or other alternatives.