MGM Holdings

History

MGM Holdings was formed on February 11, 2005 by a Sony-led consortium and on April 8, 2005, it acquired MGM in a US$4.8 billion leveraged buyout. From that period until its emergence from bankruptcy on December 20, 2010, MGM Holdings was owned by Providence Equity Partners (29%), TPG Capital (formerly Texas Pacific Group) (21%), Sony Corporation of America (20%), Comcast (20%), DLJ Merchant Banking Partners (7%), and Quadrangle Group (3%).

Attempted sale and bankruptcy protection

After being installed in August 2009 as MGM's new CEO, Stephen Cooper tried to convince MGM's lenders that they should restructure the company's long-term debt in order to allow the studio to continue with its current business model. The lenders refused to do so and argued that a sale was the only way to recoup their investment. Cooper agreed to conduct an auction to gauge the level of interest by potential buyers and the value of the assets for sale.

On November 12, 2009, MGM announced it was "beginning a process to explore various strategic alternatives including operating as a standalone entity, forming strategic partnerships and evaluating a potential sale of the company." Alternatives the company was exploring included the sale of the company or merger with another media firm, or an asset auction, which could have included the sale of its 4,000-title film and television library, the company logo, rights to the James Bond franchise, and half-ownership in the three Hobbit films. The studio also held out the possibility of gaining a large influx of cash from new investors, although industry analysts believed that alternative was unlikely to happen. Some industry analysts said sale of the studio could net $1.5 billion to $3 billion. Others pegged the value at between $2 billion to $2.5 billion. Potential buyers included Time Warner (which already owned the pre-May 1986 MGM library, had enough cash reserves, and co-produced the Hobbit films with MGM), Qualia Capital (a private equity fund led by Hollywood producer Amir Malin), 20th Century Fox (MGM's home entertainment distributor), and Lionsgate.

MGM also announced that its creditors agreed to a forbearance on the company's debt payments originally until January 31, 2010, but the forbearance was extended to March 31, 2010.

As of early December 2009, 16 companies had expressed interest in purchasing all or parts of MGM, although only two had actually negotiated a confidentiality agreement that would allow them to examine MGM's financial statements. The Hollywood Reporter said Warner Bros., 20th Century Fox, and Lionsgate were the leading suitors for the company. Industry observers worried, however, that buyers might only bid on a few of MGM's assets such as the James Bond film franchise or The Hobbit film which would draw bids of less than $1 billion. At least one industry trade publication said creditors would accept offers amounting to $2 billion for parts or all of the studio. Even a bid or bids totalling $1.8 billion might be accepted, industry observers said, if the buyer agreed to "schmuck insurance" (the right to convert debt to equity, under certain conditions and time-frames). On December 18, press reports said that News Corporation's 20th Century Fox film studio had been interested in purchasing MGM, but that News Corp. could not agree to the "restrictive" terms of MGM's nondisclosure agreement, which (in part) do not permit potential buyers to speak with MGM's creditors. The strict terms of the nondisclosure agreement also led two other potential buyers to refuse to participate, and several others were negotiating over the terms and unable to participate in the process. The due diligence process was "going slowly" one trade publication reported, with only four of the potential 20 companies participating as of December 18.

MGM originally set Friday, January 15, as the deadline to receive bids from the companies interested in acquiring the studio. However, fewer bids than expected were made. Reliance Entertainment, which has a joint venture with DreamWorks, joined the bidding on the deadline date. News Corp. reportedly signed a nondisclosure agreement on or about January 15, and was considering a bid. On January 17, the New York Times reported that bids had been received from Time Warner, Lionsgate, and a few smaller companies but that most of the offers were below the $2 billion minimum. Some of the bids may have been below $1 billion, and nearly all the bids would require MGM to file for bankruptcy first and shed its debt obligations. But the Financial Times said sources believed most bids were within the $1.5 to $2 billion range. Barclays Capital, a British investment bank, was quoted as saying, "We find it unlikely that MGM's creditors would cleanly agree to a sale price materially below $2bn." Time Warner, one media source reported, is seen by industry observers as the leading bidder since it already owns much of the MGM library and has large cash reserves. Qualia Capital, previously thought to be a potential bidder, has suggested that MGM's creditors could avoid forcing the studio into bankruptcy by agreeing to transform $500 million of debt into company stock (which would provide MGM with a cash infusion as well as eliminate a substantial portion of debt). By January 23, bids from Relativity Media (about $1.6 billion) and Reliance Entertainment (about $1.8 billion) were received as well. Six days later, MGM extended its deadline to March 31, and by the next day, News Corporation suggested that the company should offer MGM some cash to keep the company running.

A few days later, Time Warner CEO Jeff Bewkes stated that he was interested in MGM, but didn't need to be in any deals, but stated that they would think about it. At the same time, News Corporation announced that they were kicked out of the bidding after CEO Rupert Murdoch stated that he was being outbid by the other bidders, and later considered buying the now-defunct Miramax Films from Disney. Later, other bidders began bidding on Miramax and Liberty Media's Overture Films as well, which their respective owners put up for bidding.

MGM stated in February 2010 that the studio would likely be sold in the next four months, and that its latest film, Hot Tub Time Machine, might be one of the last four films to bear the MGM name. However, some stated that the company might continue as a label for new James Bond productions, as well as other movie properties culled from the MGM library. A few weeks later, MGM set March 19 as a deadline to receive bids from companies interested in acquiring the studio, including Time Warner and Lionsgate, although Time Warner was considered the most likely to buy the studio since its Warner Bros. catalog already included all the pre-1986 MGM titles originally acquired by Ted Turner.

MGM filed for Chapter 11 bankruptcy on November 3, 2010 and emerged on December 2 when the Federal Bankruptcy Court approved MGM's reorganization plan, which led to MGM's creditors taking over the company. On December 17, 2010, the company laid off about 50 staff members.

Creditor group ownership

Following the emergence from bankruptcy, MGM's secured lenders, which include Credit Suisse and JPMorgan Chase, jointly owned MGM Holdings Inc, which in turn owns the Hollywood studio Metro-Goldwyn-Mayer Inc. In December 2010, MGM named Spyglass partners Gary Barber and Roger Birnbaum as the co-Chairs and co-CEOs of the studio; and also appointed Ann Mather, the ex-Pixar CFO to head MGM's new board of directors. On December 29, 2010, MGM signed a new lease with New York-based group George Comfort & Sons for a 6-story building in the corner of 235–269 N. Beverly, leaving its old headquarters in Century City.

A late 2011 financial report revealed that MGM had acquired Tom Cruise's 30% stake in United Artists and once again owned 100% of UA. On July 31, 2012, MGM announced it would acquire Carl Icahn's stake in MGM Holdings for $590 million. Once the sale is complete, MGM will become a public company. Also on July 31, MGM sold MGM Networks, Inc. to Chellomedia, while retaining its US, Canada, UK, Germany, and joint ventures in Brazil and Australia, to raise fund to buy out Carl Icahn and prepare for an IPO.

In May 2012, MGM sold its minority non-voting shares of LAPTV to Fox International Channels while signing a long term contract for content with LAPTV. On July 31, 2012, MGM announced a deal with Carl Icahn, MGM’s largest shareholder, to acquire his stake in MGM Holdings for US$590 million. The deal allowed MGM to set a market value of US$2.4-US$3 billion for the studio, in case it went public or sold to a strategic investor. On July 31, MGM sold MGM Networks, Inc. to Chellomedia, while retaining its US, Canada, UK, Germany and joint ventures in Brazil and Australia, to raise fund to buy out Carl Icahn and prepare for an IPO. Chellomedia (later acquired by AMC Networks and renamed the latter as AMC Networks International) has licensed the MGM brand and content to continue on the purchased MGM channels.

In September 2014, MGM acquired a 55% interest in One Three Media and Lightworkers Media, both operated by Hollywood producers Mark Burnett and Roma Downey. The two companies, along with UA, were consolidated into a new film and television company known as United Artists Media Group. On December 14, 2015, MGM announced that it had acquired the remaining 45% stake of UAMG it did not yet own. Downey and Burnett will receive stakes in MGM collectively valued at $233 million with Hearst receiving cash. Additionally, Burnett was promoted to CEO of MGM Television, replacing the outgoing Roma Khanna. The planned over-the-top faith service will become a separate entity owned by MGM, Burnett, Downey, and Hearst.

Assets

MGM Holdings directly or indirectly owns and controls about 160 affiliates, with the most notable being the following group companies:

Film Production/Distribution and Home Entertainment

Television

Other assets