Entertainment giant Time Warner Inc., which has recently regained its acquisitive taste, has resurrected merger talks with Hollywood studio Metro-Goldwyn-Mayer Inc., Daily Variety reported on its Web site on Thursday.
The trade paper's unsourced story described the talks as "preliminary but serious," and said the pair would make a "natural fit" in part because Time Warner's Warner Bros. studio unit used to distribute MGM's lucrative film catalog.
Time Warner last eyed MGM in 2002, when majority owner Kirk Kerkorian's asking price was about $7 billion, Daily Variety said. But Time Warner was struggling with a heavy debt burden at the time. Now, thanks to some major divestments, such as the pending $2.6 billion sale of its music business, Time Warner's balance sheet is looking healthier.
Last week, it said it expects to end 2003 with $20.5 billion in net debt, a year ahead of schedule, down from about $30 billion a year ago.
Santa Monica, Calif.-based MGM, whose performance at the box office has been patchy at best in recent years, is widely desired because of its 4,000-plus movie library, which includes such titles as "The Pink Panther" and "Rocky."
According to Daily Variety, bankers value the library alone at about $4.4 billion, or $18 per share. MGM stock ended up 10 cents at $16.25 on the New York Stock Exchange on Wednesday, just 25 cents below its 52-week high.
MGM's recent box office hits include the comedy "Legally Blonde" and the James Bond thriller "Die Another Day." But it has stumbled more often with such costly films as "Rollerball," "Windtalkers" and "Hart's War," which has dampened the enthusiasm of prospective buyers.
Daily Variety said the talks could result in a smaller-scale deal such as the absorption of MGM's film production arm as a "mini studio" within Time Warner.
Warner Bros.' current theatrical releases include "The Last Samurai," starring Tom Cruise, and director Clint Eastwood's acclaimed "Mystic River." Corporate sibling New Line Cinema just released the much-hyped final installment of its hugely profitable "Lord of the Rings" trilogy.
Representatives for both firms were not immediately available to comment on the Daily Variety story.