MGM May Double Size of Stock Offering

Metro-Goldwyn-Mayer majority shareholder Kirk Kerkorian is prepared to support a $500-million rights offering for his cash-strapped studio, according to sources, which would double the amount of its already proposed offering.

MGM acknowledged that it was considering increasing the size of the offering, but said the company’s board has not yet met to approve the action. The board is expected to meet next week.

A rights offering is an offering of stock to a company’s existing shareholders at prices discounted from what the company might otherwise get from the public.

Since Kerkorian controls 65% of the company, approval of the increase appears certain.

MGM announced in June that it would undertake a $250-million offering to raise money for ongoing film production. Kerkorian, a Las Vegas billionaire, said he would support that offering if the marketplace did not.

Kerkorian recently imposed across-the-board budgets cuts at MGM, including freezing all new television development. An increased commitment from Kerkorian is viewed by company insiders as a bit of promising news that might temporarily ease the severe belt tightening expected to get underway at the studio.

Last week, MGM acknowledged it was exploring potential strategic partnerships and business combinations, leading many industry analysts to believe that Kerkorian was looking to unload the studio he acquired for $1.3 billion in 1996 along with Australia’s Seven Network.

Seven, which owns 25% of MGM, informed the company that it did not intend to participate in the rights offering at this time.

Exploratory discussions have been held with such Hollywood majors as Walt Disney, Warner Bros. and News Corp., but analysts caution that an all-cash sale is a longshot.

MGM’s stock, which has been trading far below the $24 a share Kerkorian paid two years ago, closed Friday at $15.19, down 19 cents, on the New York Stock Exchange.