Amazon nears deal to buy Hollywood Studio MGM

Amazon.com Inc.

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nearing a deal to buy Hollywood studio MGM Holdings for nearly $ 9 billion, including debt, people familiar with the matter said, a pact that would turn a film operation founded in the silent era into an asset of streaming for the e-commerce giant.

A deal could be announced as early as this week, people familiar with the situation said, assuming the talks don’t collapse at the last minute.

The deal would mark Amazon’s second-largest acquisition in history, behind its $ 13.7 billion purchase of Whole Foods in 2017, and highlight the premium content commands as streaming wars force consolidation and push the bigger players to come together with assets that help them compete.

The privately traded MGM was valued at around $ 5.5 billion, including debt, last December. Its stock price has skyrocketed in recent days, from around $ 105 a share in mid-May, before talks were announced, to around $ 140 a share on Monday morning. The share price hit $ 150 on Monday afternoon, after the Wall Street Journal broke news of the expected deal.

The legendary film and television studio had long-term debt of around $ 2 billion at the end of March. It was long seen as at stake, but hired investment banks LionTree LLC and Morgan Stanley late last year to begin a formal process.

News of the deal negotiations first surfaced as AT&T Inc.

has agreed to combine its media assets with Discovery Inc.

and forming a new society, a pact which should lead to even more consolidation of the media.

Talks between Amazon and MGM have continued since the start of this year, people close to the two companies said. Amazon and MGM have had exclusive talks in recent weeks, people said. The MGM board was briefed on the matter on Sunday evening, a person familiar with the situation said. There is no guarantee that they will eventually come to an agreement.

Acquiring one of the world’s most iconic entertainment brands would be a tech giant’s most aggressive foray into Hollywood to date.

The studio is best known for classics such as “Singin ‘in the Rain” as well as “Rocky” and “The Pink Panther”. MGM has a library of titles, including the James Bond franchise, which in contemporary Hollywood is an asset that can be used to generate subscriber registrations for Amazon’s Prime Video streaming service.

MGM also has a television studio whose shows include the Hulu hit “The Handmaid’s Tale” and FX’s “Fargo”. He also owns the Epix pay TV channel.

The Hulu hit “The Handmaid’s Tale” is part of the MGM TV studio broadcasts.


Photo:

George Kraychyk / Hulu / Associated Press

MGM shares the James Bond franchise with a holding company owned by the Wilson / Broccoli family, which co-owns the copyrights to existing Bond films and controls the future of the franchise. The upcoming James Bond film, “No Time to Die,” has been repeatedly delayed due to the Covid-19 pandemic and is now slated for release in October.

While Amazon is building up a large library, MGM classics such as “The Wizard of Oz” and “Gone with the Wind” were sold a long time ago along with the rest of the pre-1948 catalog and are now owned by Warner Bros.

Forbes and The Information have previously reported Amazon’s interest in MGM.

Amazon continued to invest billions of dollars in its film and television operations as well as live sports to support its Prime membership offering. The company is currently in the process of producing a television series based on “The Lord of the Rings,” which has a first season budget of $ 465 million.

Amazon has spent hundreds of millions of dollars to acquire major studio theatrical releases, like Paramount Pictures’ upcoming “The Tomorrow War” starring Chris Pratt. It has also aggressively pursued a deal to stream Sony Pictures Entertainment movies on its service, a person familiar with the situation said. Sony Pictures has finally reached a multi-year deal with Netflix Inc.

It is also investing heavily in live sports. In March, Amazon struck a long-term deal to air the NFL Thursday Night franchise for an average annual fee of $ 1.2 billion.

The MGM deal would mark the latest twist in what has been a difficult journey for the studio. In 2018, he fired then CEO Gary Barber for having preliminary conversations with Apple. Inc.

for a sale valuing the studio at over $ 6 billion. Since then, MGM has not had a CEO, but rather a “CEO’s office” made up of executives from across the company. Its board is chaired by Kevin Ulrich, co-founder of New York hedge fund Anchorage Capital Group, MGM’s largest shareholder.

MGM has weighed on its long-term hedge fund shareholders for years, several of whom got involved around 2010 with the idea that MGM’s value could be increased through a refresh of its film and television library and that they could then go out by a first audience. the offer or sale of the studio. A deal would mark a long-awaited victory for Anchorage and companies such as Highland Capital Management LP and Davidson Kempner Capital Management LP, all of which converted their debt to equity when MGM came out of bankruptcy in late 2010.

MGM is best known for classics like “Singin ‘in the Rain”.


Photo:

DPA / Zuma press

If a deal were finalized between MGM and Amazon, it could exacerbate antitrust concerns for the tech giant, which is already at the center of multiple probes due to its size and power.

Congress, the Federal Trade Commission, and the European Union, among others, have looked at competition from Amazon. A report from Congress last year determined that Amazon had monopoly power over its sellers. At the time, Amazon discussed the results in a blog post. “All major organizations are getting the attention of regulators, and we welcome this review. But large companies are not dominant by definition, and the presumption that success can only be the result of anti-competitive behavior is simply wrong, ”he said.

Colorado Representative Ken Buck, the senior Republican member of the House antitrust subcommittee who prepared the report, expressed concern about a potential deal between Amazon and MGM.

“This merger project is yet another example of Big Tech’s commitment to total dominance in all sectors of our economy. If Congress doesn’t act quickly, there won’t be a market that Big Tech doesn’t control, ”Buck said in a statement. Amazon did not immediately respond to a request for comment and a spokeswoman for MGM declined to comment on Mr Buck’s statement.

Members of Congress have also publicly criticized old deals with Amazon, such as its acquisition of Whole Foods, which they say should have received more scrutiny.

The Journal recounted how entrepreneurs who had talks with Amazon’s trading arm felt exploited by the Seattle company. Amazon said legitimate intellectual property disputes are resolved by the courts. Congress is expected to introduce new legislation that, if passed, would hurt the ability of tech giants to make important deals.

Write to Juliet Chung at [email protected], Joe Flint at [email protected] and Erich Schwartzel at [email protected]

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