LOS ANGELES (AP) _ Sony Corp. is a step closer to acquiring famed Hollywood studio Metro-Goldwyn-Mayer Inc. in a $3 billion deal that would give it a considerable library of more than 4,100 titles.
The sale would mark the third time billionaire investor Kirk Kerkorian has sold MGM, one of Hollywood's most storied names and once best known for its musical hits like ``Singing in the Rain'' and ``Meet Me in St. Louis.''
Under the proposed deal announced Monday, Sony has agreed to pay $12 per share for MGM, or about $2.94 billion cash, and assume about $1.9 billion in MGM debt. MGM said its management will recommend the ``proposed merger'' to its board by Sept. 27.
The sale is also subject to regulatory approval.
For the past two years, MGM has been hunting ways to grow larger. The company made an $11.5 billion all-cash bid for Vivendi Universal Entertainment last year, but lost that contest to NBC.
Time Warner had been seen as the front-runner to acquire MGM going into the weekend. But Sony raised its offer, setting off a bidding war that Time Warner concluded it did not want.
``As we pledged to our shareholders, we approach every potential acquisition with strict financial discipline,'' said Time Warner chairman and chief executive Dick Parsons. ``Unfortunately, Time Warner could not reach agreement with MGM at a price that would have represented a prudent use of our growing financial capacity.''
Sony is expected to shutter MGM's current production, with the possible exception of the ``James Bond'' franchises. Among MGM's upcoming films are a ``Pink Panther'' remake with Steve Martin, ``Code 46'' with Tim Robbins and ``The Beauty Shop'' with Queen Latifah.
MGM has a considerable library of thousands of titles, including the ``Rocky'' franchise. Analysts have estimated MGM's library will generate $440 million in cash flow in 2004 by exploiting only 1,500, or about 36 percent, of its titles on the newer DVD format.
Kazumasa Kubota, an analyst at Okasan Securities said that Sony's proposed purchase of MGM was aimed at boosting its brand image rather than seeking profitability.
``For Sony, MGM is an important company to strengthen its entertainment business in the United States,'' Kubota said.
MGM's movie titles can also help Sony strengthen its software business, including games and DVDs. MGM bought United Artists in 1981 and has used the brand in recent years as a boutique studio, releasing low-budget, independent films.
Sony said in a statement announcing the MGM deal that it also has reached a distribution agreement with Comcast, the nation's largest cable provider, that would allow video on demand and new cable channels featuring Sony and MGM content. Comcast is considering becoming a minority equity investor in the proposed MGM buyout, Sony officials said.
Comcast and Sony would pursue a video on demand service even if the MGM deal falls through, Sony officials said.
A Comcast spokeswoman declined to comment.
So far, Sony, along with private equity companies Providence Equity Partners Inc., Texas Pacific Group and DLJ Merchant Banking Partners, have deposited an initial $150 million in cash to MGM.