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MGM Wanted All of Rainbow

Metro-Goldwyn Mayer Inc. chairman and CEO Alex Yemenidjian told analysts
Tuesday that he would have preferred to purchase Rainbow Media Holdings Inc.
outright, but the price was just too high.

MGM, which had owned a 20% interest in three Rainbow networks -- AMC, The
Independent Film Channel and WE: Women’s Entertainment -- sold that interest
back to Rainbow parent Cablevision Systems Corp. in July for about $500

MGM also owned 20% of former Rainbow cable network Bravo, but it sold that
interest in connection with Rainbow’s sale of the channel to General Electric
Co.’s NBC television unit for $1.25 billion earlier this year. In that deal, MGM
received about $250 million in cash.

On a conference call with analysts to discuss its second-quarter results,
Yemenidjian said MGM had tried to acquire the rest of Rainbow from Cablevision
for two years, to no avail.

"Our objective was to acquire 100% of these networks," Yemenidjian said on
the call. "After several attempts to do so over a two-year period, when it
became clear that the required price would test our financial discipline, we
decided to sell our interest instead, because at that point, it was no longer
strategic, and because we believe that we have found better alternatives for the
allocation of that capital."

Yemenidjian said the company suffered a $35 million loss on the Rainbow sale
(it paid $825 million for the stake in 2001 but received $790 million from the
sale of Bravo and the other three networks, plus about $40 million from its
share of cash distributions from operations), but that loss was immaterial.

Yemenidjian also admitted that MGM was in discussions with Vivendi Universal
concerning its Vivendi Universal Entertainment assets.

He added that he was limited as to what he could disclose about those
discussions, but he said MGM would not overpay for the assets.

According to sources, MGM had offered to increase its bid for VUE to $11.5
billion if Vivendi agreed to provide MGM with more detailed information by July

Sources said last week that Vivendi refused to honor that request, rejecting
MGM’s bid as too low. However, Vivendi did invite MGM to continue in the bidding
at a higher price.

Yemenidjian would not address those reports specifically, but he said that
however the auction process works out, MGM shareholders would benefit.

"If we are successful in acquiring VUE, it would only be in the context of a
transaction that is very accretive and creates a lot of wealth for our
shareholders," he said.

"If we are not successful in acquiring VUE, I would immediately recommend to
our board of directors that we reward our shareholders by sharing some of our
company’s wealth with them," he added. "Either way, whether we are successful in
acquiring VUE or not, we expect our shareholders to be handsomely rewarded."

Yemenidjian would not be specific, although he said later that in the past,
in companies where he has worked other than MGM, he has recommended tender
offers "at a significant premium" for shareholders to reward them.

"[Tender offers have] usually been my preferred method of returning wealth to
shareholders. In this particular context, I really haven’t decided what I will
recommend," he added.