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MGM Deal Could Close by April

A Sony Corp.-led consortium that includes content-hungry cable giant Comcast Corp. has gotten the European Commission's OK to buy Metro-Goldwyn-Mayer Inc., likely clearing its final hurdle to purchasing the company and its library of 4,000-plus films and 10,000-plus TV shows from Kirk Kerkorian's Tracinda Corp.

Tracinda bought MGM's assets in 1996 for $1.3 billion.

The European Commission said Wednesday it has given its unconditional support to the sale, which was announced Sept. 23 and got U.S. regulatory approval last December.

The deal is expected to close in mid-April, contingent on financing and other closing conditions (JP Morgan Chase and Credit Suisse First Boston will provide up to $4.25 billion in senior debt financing).

Comcast Corp.'s participation in the nearly $5 billion bid (about $3 billion in cash and the assumption of some $2 billion in debt) confirmed Comcast's desire for content to supply its video-on-demand (VOD) service, which it sees as the strongest weapon to stave off attacks from satellite rivals.

For the nation's largest cable operator, the deal allows unprecedented access to a trove of screen hits, such as the James Bond, Rocky, and Pink Panther series, and big-ticket titles including Annie Hall, Dances With Wolves, In the Heat of the Night, Midnight Cowboy, Platoon, Rain Man, Rocky, Silence of the Lambs, Tom Jones and West Side Story.

On the TV side, the library includes the boomer-friendly Addams Family, Cagney & Lacey, Fame, Green Acres, Mr. Ed, The Patty Duke Show, and thirtysomething among many, many others.

Comcast's decision to join the consortium gave the Japanese company's executives confidence to top the bid of Time Warner, whose executives thought they had the auction locked up last summer.

The Sony consortium, which goes by the name of  LOC Acquisition Company, comprises Sony, Providence Equity Partners, Texas Pacific Group, Comcast and DLJ Merchant Banking Partners.

In addition to its all-important film library (exclusive of titles locked up by Turner years ago) and TV trove, MGM's operating units include MGM Networks, MGM Worldwide Television Distribution, MGM Home Entertainment, MGM Consumer Products, and ownership interest in international TV channels in more than 115 countries.

The deal is Comcast's latest move to bolster its programming portfolio, including the takeover of Tech TV, taking control of the International Channel and increasing its stake in E!.

For Sony and its financial group, TV is a small part of the deal.

The group is far more interested in the $1.1 billion a year MGM has been generating by selling its movies on DVD (TV revenues are much smaller.) But Comcast has also agreed to partner with Sony on something the studio has long desired, but never been willing to pay up for: a general entertainment cable network anchored by its movie library.

The famed library of Metro-Goldwyn-Mayer would certainly upgrade Comcast's free-VOD slate, which historically has been dominated by programs off basic-cable networks plus Japanese anime and replays of broadcast net news shows (in a couple of markets). Comcast will get up to 400 movies per year to cycle through its VOD menu. The free VOD movies will generally be at least five years old.

Comcast executives believe that, if they can hook their high-end subscribers to VOD, they'll never defect to DBS.