Sony And MGM Merger Acquisition

The following article gives a brief description as to how the Sony and MGM merger acquisition took place. There were biddings and counter biddings. There were other contenders also but finally Sony came out victorious. The main reason for Sony to acquire was not the synergy cost but acquisition of Blu Ray Disc. Facts about MGM or Metro Goldwyn Mayer Inc:

Birthday: Established in the year 1924 on the 16th day of April.

Type of company: MGM is a subsidiary of Comcast, Sony as well as their equity partners.

Products offered: Television programs and motion pictures.

Type of industry: Motion pictures
Owned by:

• Sony having 20% stake.
• TPG Capital with 20% stake
• Providence Equity Partners with 29% stake.
• Comcast-20%
• Quandrangle Group-3%
• DLJ Merchant banking Partners with 7% stake.

Sony and MGM merger acquisition took place on 8th April, 2005. The acquisition was carried out not by Sony alone. It was a joint acquisition of Comcast, Sony Corporation of America in tie up with Texas Pacific Group. Texas Pacific Group is now referred to as TPG Capital. Providence Equity Partners was also another partner in the acquisition.

Currently, Sony is responsible for distributing co productions of Columbia Tristar and MGM/UA. However, MGM is putting in all efforts to acquire rights pertaining to worldwide films. Twentieth Century Fox has taken up the responsibility of theatrical distribution internationally. It has also taken up the work of distributing home video pertaining to MGM titles worldwide. This however excludes those videos for, which Sony is a major partner. The process of Sony and MGM merger acquisition: In the year 2004, several of MGM's professional rivals started bidding for the company. Time Warner was also on the list of bidders. Ted Turner was the largest stakeholder in the company. Turner Entertainment belonging to Ted Turner had done very well since it started owning Pre 1986 MGM Library. However, Time Warner failed to strike the deal. Sony was the biggest bidder: Sony Corporation of America was found to be the biggest bidder. Sony was supported by Venture Capital Bankers TPG Capital, L.P as well as Comcast. Providence Equity Partners also tagged along. Synergy cost was not primary for Sony. The main concern of Sony was to support Blu Ray Disc at MGM. A counter bid was made by Ted Turner. On 13th September, 2004, Sony enhanced its bid of USD$4.7 billion or USD$11.25 per share to USD$5 billion or USD$12 per share. This marked the withdrawal of the USD$11 per share or USD$4.5 billion announced by Time Warner. Finally, Sony and MGM merger acquisition was brought about at a purchase price of USD5 billion. Of the USD5 billion, USD$2 billion was used by MGM to clear off debts.