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News Corp insiders tell me: "Our negotiations screeched to a standstill Friday night. We’re at an impasse over a highly restrictive (and unusual) provision in their 'must sign NDA [Non-Disclosure Agreement]'. So who knows what will happen next? But for now it’s 'Pens Down'." This isn't good news for the embattled film studio MGM which has been teetering on the brink of bankruptcy because of its crushing $4 billion debt. So it's on the block and sent confidentiality agreements to about 20 interested parties last month including News Corp, Time Warner, Lionsgate, Sony, etc. (Also, see my previous EXCLUSIVE: Carl Icahn Buying Up MGM Bonds "Like A Bat Out Of Hell".)
The NDAs are a precursor to letting potential bidders examine its books. MGM's debtholders who've lost patience with the studio want to break up the company and sell off its valuable library. But other creditors would first like to see how bidders value the company if left whole. So far, this isn't a traditional sales auction with prospectus, etc. Instead, MGM has been setting up a virtual data room and management presentations to give bidders access to information. That the confidentiality agreements also aren't standard clearly is hindering the process.
MGM lenders have agreed to extend the forbearance until January 31, 2010 as the studio explores various strategic alternatives -- including operating as a standalone entity, forming strategic partnerships, or evaluating a potential sale of the Company. MGM faces debt obligations of $3.7 billion stemming from its 2005 buyout -- (by a group including private equity firms Providence Equity Partners and TPG, and media firms Sony and Comcast for $2.85 billion, and assumption of $2 billion in debt) -- plus payments on a $250 million revolving credit facility due April 2010.
- EXCLUSIVE: Carl Icahn Buying Up MGM Bonds "Like A Bat Out Of Hell"
- MGM Claims Forbearance Until January 31 & Start of Process To Sell/Partner Studio
- MGM Claiming Business As Usual Despite Auction Preparation And Nervous Vendors
- MGM Moves Its Movies Around New Sked
- TOLDJA! MGM Confirms Forbearance Agreement With Its Lenders Until Dec. 15
- MGM May Get Forbearance Until Dec. 15 As On Brink Of Bankruptcy
- MGM May Get Forbearance Until Dec. 15 As It Teeters On Brink Of Bankruptcy
- MGM's Plea To Bondholders To Stay Alive
- EXCLUSIVE DETAILS: MGM Makes Phone Plea To Bondholders Not To Go Bankrupt
- MGM CEO Harry Sloan Out, Mary Parent In
- Separating MGM Truth From Fiction...
- EXCLUSIVE UPDATE: Studio Library Valued At $5.5B
- TOLDJA! MGM Audit Shows Full Compliance With All Debt Covenants
- GOOD NEWS FOR MGM: Audit Will Show Struggling Studio Is A "Going Concern"
- MGM FIGHTS TO SURVIVE: Desperate To Restructure Crushing Debt Due In 2012
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Any idea what the “highly restrictive (and unusual) provision” relates to? The primary purpose of NDA’s is to protect confidential information disclosed between the parties. If News Corp was the likely buyer, they’d own that confidential information in any event. Unclear how an NDA could derail the negotiations since usually just the starting point of due diligence.
Splinter, I’m with you. Having drafted NDAs for more years than I’d like to admit, it would be interesting to see the “unusual” provision that is causing all the trouble, and hear the rationale for it.
Actually the NDAs are about not revealing the list of MGM’s remake projects for the next ten years. THAT would terrify bidders.
It would be some kind of karma-like “closing of the circle” if News Corp’s Twentieth Century Fox were to eventually buy Metro-Goldwyn Mayer because this would be the second time it has happened.
For those not up on Hollywood history, back in 1929 William Fox, then the controlling shareholder of Fox Film Corporation, bought Loew’s Incorporated, the parent company of Metro-Goldwyn-Mayer, right out from under the noses of Louis B. Mayer and Irving Thalberg. He did it with the aid of Nicholas B. Schenk, the president of Loew’s Incorporated, who surreptiously sold to Mr. Fox not only his own shares in the company, but also the shares of the recently-deceased Marcus Loew which Mr. Schenk had control of and which constituted a majority of the shares in Loews Incorporated.
Unfortunately for Mr. Fox, he was shortly thereafter in an automobile accident near his estate on Long Island, Fox Hall, that nearly claimed his life. By the time he came out of his coma, Louis B. Mayer had already called on his good friend, Herbert Hoover. who had just been inaugurated as President of the United States, to have the Justice Department block the sale.
Which they did.
Then Wall Street “Laid An Egg” in Ocober of 1929 and the Depression was on. Fox Film Corporation, under the weight of its vast unprofitable theatre holdings, slid into receivership in l933. William Fox was ousted by the bankers and while he finagled to get back into the company he founded, Louis B. Mayer and Irving Thalberg saw their chance for revenge. Messrs. Mayer and Thalberg and a few others — including Nicholas Schenk’s own brother — funded a new small independent production company run by Darryl F. Zanuck and William Goetz (one of Louis B. Mayer’s sons-in-law — the other being David O. Selznick — “The Son-In-Law Also Rises” according to some wags).
That new company was 20th Century Pictures which in 1935 merged with — but really took over completely — Fox Film Corporation.
So, goodbye for ever William Fox who died in 1951 with, I believe net assets of about $300 to his name.
I expect full page book reports in the morning on my desk. . .
Book report? How about a draft script? Sounds like a great storyline.
William Fox also attempted to bribe a judge as he couldn’t process the antitrust litigation against him and spent time in jail.
He also had one arm and was an outstanding golfer and would win many bets this way.
He also was the father of international distribution.
Please add these to your wikipedia page.
-RnsW
And let’s not forget that William Fox bought the Tri-Ergon patents from Germany which were the patents for his Movietone sound-on-film process (as opposed to the Warner Brothers Vitaphone sound process of sound-on-disc). It was his sound-on-film process that completely displaced Vitaphone within about 2 years of the October 1927 premiere of”The Jazz Singer”.
The father of international distribution, of sound-on-film, the builder of what was then Movietone City which is now Century City and a scratch golfer.
No wonder he had this annoying habit in conversation of speaking about himself to others in the third person as in “William Fox is going to play golf” as opposed to “I am going to play golf”. What a character! Only in Hollywood. . .
I don’t think Rupert( Fox) would agree to the non-disclosure agreement, what’s the point its a fire sale and all info will be disclosed in court very soon.
Time is money, so by Jan 1,10 I see bankruptcy in the picture.
Nine days and counting.
I wonder if someone on the inside is using this system to drive off potential bidders, possibly lowering the price, so they, or the people they represent can swoop down and pick it up for a song.
This could get interesting.
Rupe must have realized he only needs one studio to make sucky movies, not two.
To ewk: I learned something today. Thank you.
I’ve only hit the bare bones outline of just one example of the financial chicanery and plain crookedness which was rampant all over Hollywood then — e.g. there is also the brothers Warner selling their own stock short based on insider information and pocketing $9,000,000 in about 30 days time when bread was a nickel a loaf. Or Irving Thalberg and his little problem of income tax evasion and his bare escape from a federal indictment and landing in the hoosegow.
Of course, we all know now that financial chicanery and plain criminal crookedness are things of the past for Hollywood, but I digress. . .
As to Mr. Fox and company, check out a 1969 book called “The Greatest Fox Of Them All” by Glendon Allvine. Probably will only find the book at the downtown L.A. main library but it is certainly worth seeking out. Mr. Allvine was William Fox’s director of publicity and advertising when all this wheeling-and-dealing was going on. I read the book a lifetime ago and it was a guilty pleasure then. Thanks to you, I’ve pulled it off of my bookshelves once again and I’m going to carry it to my bed room in a brown paper bag.
There’s only one comment that needs to be said:
IT ALL STARTED WITH KIRK.
The eventual downfall & ruin of the once great studio can be traced back to his buying/selling/buying/selling and looting (along with a big assist from ol’ Teddy Turner). Let’s face it: Kirk Kirkorian IS Gordon Gekko.
what a waste. MGM aint dead yet. Columbia Pictures was in far worse shape in the early 1970s and now look at them today. MGM can come back.
Exactly true! Columbia Pictures was in the crapper then and functionally bankrupt.
I agree with Val! There is hope for MGM, I would like to see it come back, there is too much history for it to fall by the wayside.
Jesus, can’t they take what ever is in there NDA out, or do they WANT to be b roken up?
I’m confused: Various articles keep referring to MGM’s “valuable 4,000 film library,” but I thought Time Warner now owns the pre-1986 MGM film library. Yes/No?
MGM owns its own post-1986 library, but the real value is from the non-MGM libraries to which it owns rights. Companies would love to mine the properties for sequels, remakes, or adaptations from United Artists (James Bond, Sergio Leone spaghetti westerns), Orion (The Silence of the Lambs, Hoosiers), Filmways (Green Acres, Mister Ed), etc. Many of the properties – The Beverly Hillbillies, Rocky, The Pink Panther, RoboCop – have already been (or soon will be) remade, and there are all sorts of exceptions for rights here and there (e.g., The Addams Family, Amadeus). But in the end, MGM will be acquired or disassembled simply as an intellectual property purchase.
The pre-1986 MGM library (which included the 789 pictures in the RKO Radio Pictures library, many of the United Artists pre-1956 pictures and almost all their 1956-1986 pictures, as well as the pre-1948 Warner Brothers library and the pre-1948 color Merrie Melodies and Looney Tunes)was bought by Ready Teddy Turner. When Turner was bought by Warner Brothers, all of that came under the control of Warner Brothers. What Warner Brothers wanted most, of course, was the return of their own heritage — their own pre-1948 features films and cartoons.
What MGM consists of today is the post-1986 MGM library, the post- 1986 United Artists library, and all the various companies that had been recklessly and foolishly financed by Frans Afman at Bank Credit Lyonnais in the 1980’s, all of which failed and all of which were subsequently consolidated into one group. These include Orion Pictures, Avco Embassy, Cannon Films (which itself ended up owning, I believe, the Filmways library which, in turn owned the old American International Pictures library)
So, there are indeed 4000 films in the library but boat loads of them are plain crap. I mean, when’s the last time you said, “Let’s go rent at Blockbuster one of those great Golan-Globus productions. I mean those boys were some picture makers, huh?”
MGM owns the AIP library, the Orion Library, the entire United Artists catalog and a number of independent libraries– and everything from 1985-on.
Yes, Time Warner owns the classic pre-’86 MGM library. But MGM itself does have an enormously valuable 5000+ library of its own, covering:
*United Artists
*the Samuel Goldwyn Company (with limited access from the Goldwyn Trust)
*Orion (includes American International and Filmways)
*a slew of fallen indie companies from the ’70’s-’90’s, including Hemdale, Island, Vision, Gladden, Cannon, Polygram (pre-’96 only, post-’96 are at Universal/Focus), and many others.
Through it’s various acquisions, it also has interest (TV and merchandising rights) in selected StudioCanal, Castle Rock, DeLaurentiis, and Miramax productions.
It’s not the Tiffany studio it once was, but it has value beyond just James Bond – consistently popular catalog titles on TV and DVD, intellectual property rights – perfect for VOD and HD exploitation. MGM was one of the first studios to start mastering films to HD before the format was popular. As such, a smaller company like Lionsgate that needs a prestige library, or even a major with a limited library like Sony, would find these holdings a great thing to own.
MGM, is private corp? What is their stock value?
After looking at that handy chart Nicky any fool would buy up Lions Gate they have eight films in development and had Hotel Rwanda and Crash five years ago.
What has MGM put out in the last five years Casino Royale and The Brothers Grim. The 32 films they have in development don’t look apertizing except for Red Dawn and Bond 23 and the three stooges.
Five dollars a share and you can own Lions Gate, I bet they have a NDA that rocks.
and then comcast.
MGM has a bunch of really cool ORIGINAL STUFF ready to go — (not just remakes) — which along with Bond and The Hobbit will be as “grand” as most other studios out there.
EVERY studio has had their dark days (with bad remakes and bombs) — Warners had a bunch of turkeys in a row (Poseidon, Speed Racer etc) as did Fox (Max Payne, The Day the Earth Stood Still, City of Ember) and Paramount (Imagine That) and even Disney had some MAJOR disappointments — all the public wants is to be entertained! And the more DIFFERENT STUDIOS out there, the more options. The less studios, and there will eventually be ONE studio’s taste dictating what every watches. And they own a library from Orion (Robocop,Dances with Wolves, Platoon, Silence of the Lambs, to name a few), UA and a bunch of other cool stuff. Lots of the damage was done by the former regime which had rushed all the remakes into the pipeline and now the new team has to get their chance at bat!