MGM Board OKs a One-Time Dividend of $8

Film studio Metro-Goldwyn-Mayer Inc. declared a one-time dividend of $8 on Monday amid speculation that the studio could soon be sold.

The Century City-based company said its board approved the special payment, proposed by management earlier this year. Shareholders of record at the close of business on May 7 will be paid the dividend on May 17.

MGM’s largest shareholder is billionaire Kirk Kerkorian through his closely held, Las Vegas-based Tracinda Corp. holding company. Kerkorian owns about 74% of shares and stands to make about $1.4 billion from the dividend.

The company said it expected that the dividend would qualify as a tax-free return of capital to shareholders.

The company is using cash from refinanced credit, including $2 billion in term loans and a $400-million revolving line of credit, to pay the dividend. Essentially, MGM is leveraging several years of expected cash flow to pay the dividend.

MGM is in talks to be acquired by Sony Corp. and two private investment companies, according to a source familiar with the talks. Sony is mainly interested in acquiring MGM’s library of more than 4,000 films, including profitable film franchises such as the James Bond series.

“Our strong cash flow and our confidence in our ability to continue to generate strong cash flow are the principal reasons why we decided to reward our shareholders with an extraordinary dividend of $8 per share,” said Alex Yemenidjian, MGM’s chairman and chief executive.

Shares closed down 10 cents Monday at $20.17 on the New York Stock Exchange. They rose 3 cents in after-hours trading, following the dividend announcement.