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06-30-2003, 11:49 AM
June 30, 2003
MGM to Sell Cable Stakes to Cablevision
By REUTERS
Filed at 11:30 a.m. ET
NEW YORK (Reuters) - Metro-Goldwyn-Mayer Inc. on Monday agreed to sell its minority stakes in a group of cable networks to Cablevision Systems Corp. in a $500 million deal that could help each of them in rival bids for the U.S. entertainment assets of Vivendi Universal (V.N).
MGM (MGM.N) said it would sell its 20 percent stake in networks American Movie Classics, The Independent Film Channel and WE: Women's Entertainment to Cablevision Systems Corp.'s (CVC.N) Rainbow Media unit, which owns the remaining 80 percent of the networks.
The transaction could strengthen MGM and Cablevision as they compete for the Vivendi assets. MGM would get cash to help its bid while Cablevision would own a 100 percent stake in the channels, which it is contributing to a rival bidder.
Cablevision has pledged the three networks to Vivendi Vice Chairman Edgar Bronfman Jr. for his offer to buy Vivendi Universal Entertainment (VUE), the unit that houses Universal Studios, cable channels USA and Sci Fi and theme parks. In exchange, Cablevision would get as much as one-third of the company if Bronfman's bid were to succeed, sources close to the deal said.
``Cablevision gets a good price and they simplify their structure of the channels, which helps the Bronfman bid for Vivendi,'' said Robert Routh, an analyst for Natexis Bleichroeder. ``For MGM. it helps their balance sheet going into a bid and it gives them cash for something the market never gave them credit.''
MGM shares rose 7 cents to $12.40, while Cablevision shares rose 10 cents to $21.21.
MGM said cable operator Cablevision would pay $250 million cash at closing, which is expected in the third quarter, and $250 million five months later. The Los Angeles-based film studio also said it would report a $93 million book loss in the second quarter, which ends on Monday.
Cablevision, based in Bethpage, New York, said in a separate statement that the second $250 million payment could be either cash or Class A common shares.
MGM bought the minority stakes from Cablevision in 2001 for $825 million. It sold its 20 percent interest in arts channel Bravo, a fourth network that was part of the original deal, to NBC earlier this year for $250 million.
MGM also earned about $40 million in dividends for the networks while it owned them, meaning it is losing about $35 million on its two-year investment.
MGM said investors never appreciated the true value of the Los Angeles-based film studio owning the networks.
``We are turning an asset for which the financial community gave us little credit into over $2 per share in cash,'' MGM Chief Executive Alex Yemenidjian said in a statement.
After the second payment is made, MGM would have about $1.2 billion of cash on its books and $1.15 billion of debt.
MGM's bid values VUE at about $11 billion, sources familiar with it said. The structure would enable Vivendi to keep a 20 percent stake in VUE or to sell it as soon as the deal is completed. MGM and its backers are putting up about $9 billion in cash.
MGM to Sell Cable Stakes to Cablevision
By REUTERS
Filed at 11:30 a.m. ET
NEW YORK (Reuters) - Metro-Goldwyn-Mayer Inc. on Monday agreed to sell its minority stakes in a group of cable networks to Cablevision Systems Corp. in a $500 million deal that could help each of them in rival bids for the U.S. entertainment assets of Vivendi Universal (V.N).
MGM (MGM.N) said it would sell its 20 percent stake in networks American Movie Classics, The Independent Film Channel and WE: Women's Entertainment to Cablevision Systems Corp.'s (CVC.N) Rainbow Media unit, which owns the remaining 80 percent of the networks.
The transaction could strengthen MGM and Cablevision as they compete for the Vivendi assets. MGM would get cash to help its bid while Cablevision would own a 100 percent stake in the channels, which it is contributing to a rival bidder.
Cablevision has pledged the three networks to Vivendi Vice Chairman Edgar Bronfman Jr. for his offer to buy Vivendi Universal Entertainment (VUE), the unit that houses Universal Studios, cable channels USA and Sci Fi and theme parks. In exchange, Cablevision would get as much as one-third of the company if Bronfman's bid were to succeed, sources close to the deal said.
``Cablevision gets a good price and they simplify their structure of the channels, which helps the Bronfman bid for Vivendi,'' said Robert Routh, an analyst for Natexis Bleichroeder. ``For MGM. it helps their balance sheet going into a bid and it gives them cash for something the market never gave them credit.''
MGM shares rose 7 cents to $12.40, while Cablevision shares rose 10 cents to $21.21.
MGM said cable operator Cablevision would pay $250 million cash at closing, which is expected in the third quarter, and $250 million five months later. The Los Angeles-based film studio also said it would report a $93 million book loss in the second quarter, which ends on Monday.
Cablevision, based in Bethpage, New York, said in a separate statement that the second $250 million payment could be either cash or Class A common shares.
MGM bought the minority stakes from Cablevision in 2001 for $825 million. It sold its 20 percent interest in arts channel Bravo, a fourth network that was part of the original deal, to NBC earlier this year for $250 million.
MGM also earned about $40 million in dividends for the networks while it owned them, meaning it is losing about $35 million on its two-year investment.
MGM said investors never appreciated the true value of the Los Angeles-based film studio owning the networks.
``We are turning an asset for which the financial community gave us little credit into over $2 per share in cash,'' MGM Chief Executive Alex Yemenidjian said in a statement.
After the second payment is made, MGM would have about $1.2 billion of cash on its books and $1.15 billion of debt.
MGM's bid values VUE at about $11 billion, sources familiar with it said. The structure would enable Vivendi to keep a 20 percent stake in VUE or to sell it as soon as the deal is completed. MGM and its backers are putting up about $9 billion in cash.