Bloomberg News

MGM Film Studio Adopts Takeover Defense as Owners Weigh Options

September 13, 2013

MGM Holdings Inc. (MGMB:US), maker of the James Bond movies, approved a stock buyback and adopted a shareholder rights plan to thwart any unfriendly takeovers as it considers ways to maximize shareholder value.

The studio, which filed for an initial public offering last year, is weighing options amid the box-office success of Bond films and “The Hobbit: An Unexpected Journey,” as well as a recovery in home entertainment. The actions aren’t in response to any known buyout effort, the Beverly Hills, California-based company, owner of Metro-Goldwyn-Mayer, said today in a statement.

“It sounds like the company is entertaining deals that would be beneficial to the entire shareholder base,” Steven Azarbad, co-founder of New York-based Maglan Capital LP and an MGM investor, said in an e-mail.

MGM Holdings’ gains have attracted investors including billionaire Daniel Loeb, who previously pressed Sony Corp. to sell as much as 20 percent of its film and TV business in an initial public offering.

Loeb’s Third Point LLC is one of MGM’s top five owners, according to a person with knowledge of the situation.

“I don’t think the poison pill is directed specifically at Dan Loeb,” Azarbad said.

In May, the Hollywood Reporter said Loeb had purchased an undisclosed amount of MGM Holdings, helping to drive up the price in private trades. The company submitted a confidential filing for initial public offering in July 2012, without going forward.

Stock Buyback

Elissa Doyle, a managing director with Third Point in New York, declined to comment.

MGM has about 55 million shares outstanding, according to the company. The repurchase authorization totals $75 million, or about 2.5 percent of the stock. Shares of MGM Holdings, traded intermittently over the counter, were quoted at $55 today, according to Azarbad, up about 50 percent this year.

Under the stock rights plan, investors would be able to buy new junior preferred shares if a party acquired 10 percent or more of the company or announced a tender offer. The plan is designed to deter “abusive, coercive, manipulative and discriminatory takeover tactics,” MGM Holdings said.

“MGM’s healthy balance sheet and efficient operating structure position the company for a wide array of options to maximize shareholder value,” Ann Mather, the studio’s lead director, said in the statement. “The MGM board is considering all of these options carefully, and has approved the share repurchase plan in recognition of the company’s strong performance to date and future prospects.”

Profit Gains

MGM studio emerged from bankruptcy almost three years ago, with creditors Highland Capital, Solus Alternative Asset Management LP and Anchorage Capital Group LLC as the controlling owners. They continue to be among the top investors, said the person, who wasn’t authorized to speak publicly and asked to remain anonymous.

The company has prospered under its new owners. Profit increased more than sixfold to $35.9 million in the second quarter, the studio said on Aug. 14. Revenue more than doubled to $339 million.

Two theatrical releases are scheduled for later this year: “Carrie,” with Sony, is set to open in theaters on Oct. 18. “The Hobbit: The Desolation of Smaug,” with Time Warner Inc.’s New Line, comes out on Dec. 13.

To contact the reporter on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net


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