MGM’s Back On The Block And Floating A $10 Billion Price Tag. Don’t Count On It.

Amazon among prospective bidders “kicking the tires” on the faded Golden-Age studio.

For more than a decade, Anchorage Capital’s Kevin Ulrich has been looking for a way to spin a tale of success out of Metro-Goldwyn-Mayer Studios. Last month, a flurry of activity started to suggest he was on the verge of doing just that, with a rumored deal to unload the fabled studio for as much as $9 billion.  

If consummated, the sale would go a long way toward showing his investors that Ulrich — who failed to sell the home of James Bond and such timeless classics as Ben-Hur and The Wizard of Oz twice before — is more than just the latest “dumb money” to hit Beverly Hills. 

Ulrich, who has kept investors fuming from the wings for years made it all too easy for his critics, as he indulged in a life more familiar to Louis B. Mayer than Warren Buffett: Posing for photos at the Toronto International Film Festival; holding court at the Oscars in LA and using the studio’s public relations firm to secure party invitations. 

“There’s Hollywood fatigue at MGM,” Los Angeles-based investment banker Lloyd Greif. “It’s nice to get invited to the red carpet, but let’s face it, there’s not going to be another red carpet for the next 12 months.”

Greif says that if the stars aligned and competing streaming services decide to battle for control of the MGM library, it could sell for as much as $9 billion. It’s possible that the studio attracts an outsider, another in what veteran media analyst Hal Vogel calls a “long conga line of buyers,” including Ulrich, who have been seduced by their fascinations with the movie business.

The problem? Outside of the upcoming Bond sequel, No Time to Die, the studio that once boasted “more stars than are in the heavens” has a library of films franchises, like The Pink Panther and Rocky, that are showing their age.  And burgeoning streaming services like the Walt Disney Co.’s Disney+ and WarnerMedia’s HBO Max are increasingly relying on their own in-house production capabilities, notes one industry attorney, who says it will become increasingly harder for independent content “arms dealers” to survive. Hopes of fetching the lofty $10 billion price tag Ulrich’s investors are reportedly seeking are rapidly fading. Scoffed one movie biz insider: “Oh please, it’s been for sale for 100 years.”

That’s not to say there isn’t interest. Potential buyers are said to include Mike Hopkins, senior vice president of Amazon Prime Video and Amazon Studios, who has held “exploratory talks.” MGM’s former CEO, Harry Sloan is in there too. He and business partner Jeff Sagansky, are raising $1.5 billion for their seventh special purpose investment vehicle — an evaluating potential targets. Spokespeople for Amazon and Sloan’s Eagle Equity Partners declined comment. Others floated as potential buyers — Comcast’s NBCUniversal and AT&T’s WarnerMedia — are little more than fantasy at this point, though Apple remains a speculative wild-card.

The problem is that MGM’s collection of great movies is dated and losing value by the minute. Barbara Broccoli and her half brother Michael G. Wilson, who maintain an iron grip over the Bond franchise — a deal initially hammered out decades ago by Broccoli’s father, producer Albert “Cubby” Broccoli — have the final say over casting decisions, dialog and promotional materials related to 007 — adding complexity to any deal talks. 

MGM, for its part, declined comment on reports that it’s exploring a sale.

In its heyday, from the 1920s through the early 1950s, MGM produced a string best picture nominees every year for two straight decades. Its roaring studio mascot, Leo the Lion, reigned as king of the Hollywood jungle. By the time the billionaire raider took over, the swashbuckling days of Louis B. Mayer were long gone and even the studio’s last notable footprint — a high-profile skyscraper in Century City — had been ditched for smaller space near Rodeo Drive. 

Kerkorian first snagged MGM in 1969 by outmaneuvering the Bronfman family, eventually merging it with another legendary studio, United Artists. He sold it all in 1986 to Ted Turner for $1.5 billion and bought back the company, minus the library of 2,200 gems including Oz, for $300 million. Next was Italian financier Giancarlo Parretti who bought MGM/UA for $1.3 billion in 1990, attracted by the United Artists film library, which includes the James Bond, Rocky and Pink Panther films, and a handful of recent hits including A Fish Called Wanda and Rain Man. Parretti threw himself into the Hollywood lifestyle, buying a $9 million Beverly Hills mansion and a Rolls-Royce, even as he ran the studio into the ground. French bank Credit Lyonnais, which financed the purchase, seized MGM after he defaulted on his loans, and wound up selling it back to Kerkorian for the same price six years later. 

Kerkorian himself tried his hand at building a suite of MGM movie channels but stumbled. He struggled to sell it until 2005, when the Sony group arrived with $5 billion and the prospect of a geyser of cash from selling the remaining titles on DVD sales. Not long after the acquisition, the home video market peaked and plummeted, leaving MGM without the cash to pay off the debt associated with the leveraged buyout of the studio. Ulrich bought up loads of the debt for 50 cents on the dollar and became the studio’s largest single owner when it emerged from bankruptcy with a court-determined value of $2 billion.

Just a few months ago, with the coronavirus wreaking havoc on film and television production schedules, Ulrich’s investors perked up at the sudden explosion of demand for streaming services. MGM’s 4,000 movies, 17,000 television episodes and a trove of franchises — from the billion-dollar Bond films to Rocky and the Pink Panther — could be re-imagined or serialized by a growing number of competing services including Amazon and Apple.

Some of the stakeholders — which include Highland Capital Partners, Davidson, Kempner Capital Management, Solus Alternative Asset Management and Owl Creek Investments — have been urging Ulrich to move on for some time, say multiple sources close to MGM. They almost prevailed in 2016, when MGM was close to reaching an $8 billion deal with a Chinese buyer in 2016 before a government crackdown scuttled talks. Negotiations over a $6 billion deal with Apple collapsed after the board’s ouster of MGM’s CEO, Gary Barber, though MGM dismisses those reports as “rumor.” Owl Creek’s Jeffrey Altman wrote a letter to the board in 2018 that pressed again for a deal. He declined comment for this article. The other investors declined Forbes’ request for comment, and Ulrich did not respond to Forbes’ interview requests. 

“None of the other investors are Warren Buffet types who buy to hang on forever,” says one longtime industry insider. “It’s the exact opposite.”