News from Bree
Valinor
Thanks to Ringer Kookie for this heads up from the NY Times:
Indian Conglomerate Makes Bid for MGM
- Thread starter News from Bree
- Start date
Compa_Mighty
Tol Eressea
With a big finishing Bollywood choreography after the Battle of the Five Armies. [
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This is interesting, we'll have to see how this turns out.
] This is interesting, we'll have to see how this turns out.
Eruonen
Half-elven
Rather late in the game to jump in and who knows what
their intentions will be. Just what we need, another financial complication...things were humming along and now not so fast. Ultimately, an offer will be accepted, probably along the same time frame as before...I hope.
I can't can't see a Bollywood Hobbit as there are no female parts....but they could just add them....and some of the Indian actresses would make beautiful elves.
their intentions will be. Just what we need, another financial complication...things were humming along and now not so fast. Ultimately, an offer will be accepted, probably along the same time frame as before...I hope.
I can't can't see a Bollywood Hobbit as there are no female parts....but they could just add them....and some of the Indian actresses would make beautiful elves.
Pipe Dream
Gondor
grammaboodawg
Immortal
Looking at the way the world has shrunk... it's not a surprise. Time will tell. If this is what it takes to get the films made, so be it.
sphdle1
Grey Havens
if they inherit 2 bil in debt, that may get repaid over just a few years with some near guaranteed movies that they would inherit, such as The Hobbit and Bond, etc., not to mention future royalties on all past movies that are played or sold throughout the world/blu-ray, etc.
I'm sure someone has calculated how long it would take to recover that 2 bil, and then be in the clear to make profit...
I'm sure someone has calculated how long it would take to recover that 2 bil, and then be in the clear to make profit...
Mike Fleming from Deadline New York writes: Despite the speculation that India conglomerate Sahara India Pariwar might swoop in and buy MGM for $2 billion, it doesn't sound like management is taking it that seriously. At least not based on this internal memo I just got hold of:
To All Employees: We wanted to take this opportunity to provide you with an update on the Company's restructuring efforts. Recently we announced that our lenders have again agreed to extend the forbearance period relating to certain of our debt obligations and we are appreciative of their ongoing support throughout this process.
We recognize that throughout this restructuring process, there has been a great deal of speculation about the Company's future in the media and elsewhere which can be very distracting. We appreciate the focus, hard work and dedication you all have demonstrated for the last year. We can assure you we are working to bring this process to a conclusion as quickly and thoughtfully as possible. However, the process is still evolving and we appreciate your understanding that there are not a lot of definitive answers at this stage. More..
We recognize that throughout this restructuring process, there has been a great deal of speculation about the Company's future in the media and elsewhere which can be very distracting. We appreciate the focus, hard work and dedication you all have demonstrated for the last year. We can assure you we are working to bring this process to a conclusion as quickly and thoughtfully as possible. However, the process is still evolving and we appreciate your understanding that there are not a lot of definitive answers at this stage. More..
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Hobbitonmayor
The Shire
I agree Kangi. I am happy people didn't pay this much mind since it is a bit late in the game to make a bid.
Also, I feel bad for the workers at MGM who have to worry about the situation and possibly losing their jobs, paychecks, etc....
Also, I feel bad for the workers at MGM who have to worry about the situation and possibly losing their jobs, paychecks, etc....
Elven
Valinor
Right [cool]
Im wondering if its just the politics of business. It seems that the offer from Sahara India Pariwar comes at the eleventh hour while a non binding Spyglass arrangement is being negotiated to secure a established future. It may see the SpyG negotiations move along with a little more vigour. MGM's Investors and Lenders must be confident then that with a new SpyG agreement that they can pull MGM out of its debt and above the surface - otherwise - they're going to still be in a situation where the debt is hanging around effecting budgets for some time to come.
I'd rather see MGM with a strong financial structure in place before they move into The Hobbit, and not lean on these movies to pull them out of the debt laden trouble that they're balancing, though not doubt they will substantially increase their bottom line - though it seems to place a lot of pressure on those who have to churn out those upcoming $dependent Movies (Hobbit/Bond)
and as for the leaked memo...
I think that persons office will be moved to the basement in the restructuring process [cool]
Im wondering if its just the politics of business. It seems that the offer from Sahara India Pariwar comes at the eleventh hour while a non binding Spyglass arrangement is being negotiated to secure a established future. It may see the SpyG negotiations move along with a little more vigour. MGM's Investors and Lenders must be confident then that with a new SpyG agreement that they can pull MGM out of its debt and above the surface - otherwise - they're going to still be in a situation where the debt is hanging around effecting budgets for some time to come.
I'd rather see MGM with a strong financial structure in place before they move into The Hobbit, and not lean on these movies to pull them out of the debt laden trouble that they're balancing, though not doubt they will substantially increase their bottom line - though it seems to place a lot of pressure on those who have to churn out those upcoming $dependent Movies (Hobbit/Bond)
and as for the leaked memo...
I think that persons office will be moved to the basement in the restructuring process [cool]
sphdle1
Grey Havens
when you mentioned 'history', a memory just popped in my head of when our family went to Disney World in Orlando (2006), and one of the theme parks was MGM Studios...it had lots of history of cinema there. They've since changed the name to Hollywood Studios...maybe Disney knew MGM would be in trouble back then when they changed the park..?
squire
Half-elven
After a bit of quick research, I found that Disney's use of the MGM name for its Studio-themed park was based on a 20-year agreement made in 1985. At the time Disney was not a big player in contemporary Hollywood, and it wanted as insurance for its new park the right to use MGM's famous name and its back catalog of classic films.
Almost immediately, the deal went sour. For one thing, MGM was bought by Ted Turner, who kept its catalog for his TBS cable network (and Turner eventually merged with Warner Brothers, which now owns the famous catalog), and then sold the studio brandname back to Kirk Kerkorian. Mr. Kerkorian, now the owner of MGM's brand, was horrified to discover that Disney had exclusive rights to all theme parks based on the MGM brand, for a token licensing fee. He sued to break the deal, since he wanted to develop his own MGM theme park in Las Vegas next to MGM-Grand's new casino. Disney counter-sued, and the courts said both parks could proceed.
The Las Vegas park went belly-up in 8 years. Meanwhile Disney discovered that with the established success of its park in Orlando, deals with other studios like Warners, and the revived fortunes of its own studio (remember the animation revival starting with Little Mermaid?), the MGM name had become of relatively little value. At the end of the 20-year period Disney phased it out, climaxing with the re-naming of the park as Hollywood Studios.
Did the Disney change the park's name because MGM was in trouble? Indirectly, yes. After all, if MGM was a powerhouse in present-day Hollywood, the brand would still be valuable to Disney. Directly, no - the name change followed the expiration of the contract on a deal that had gone sour years before.
Almost immediately, the deal went sour. For one thing, MGM was bought by Ted Turner, who kept its catalog for his TBS cable network (and Turner eventually merged with Warner Brothers, which now owns the famous catalog), and then sold the studio brandname back to Kirk Kerkorian. Mr. Kerkorian, now the owner of MGM's brand, was horrified to discover that Disney had exclusive rights to all theme parks based on the MGM brand, for a token licensing fee. He sued to break the deal, since he wanted to develop his own MGM theme park in Las Vegas next to MGM-Grand's new casino. Disney counter-sued, and the courts said both parks could proceed.
The Las Vegas park went belly-up in 8 years. Meanwhile Disney discovered that with the established success of its park in Orlando, deals with other studios like Warners, and the revived fortunes of its own studio (remember the animation revival starting with Little Mermaid?), the MGM name had become of relatively little value. At the end of the 20-year period Disney phased it out, climaxing with the re-naming of the park as Hollywood Studios.
Did the Disney change the park's name because MGM was in trouble? Indirectly, yes. After all, if MGM was a powerhouse in present-day Hollywood, the brand would still be valuable to Disney. Directly, no - the name change followed the expiration of the contract on a deal that had gone sour years before.
Kristin Thompson
Rohan
If the Spyglass deal goes through, as seems very likely, the debt will disappear. The planned deal is that the creditors will exchange their various chunks of debt for a comparable proportion of the ownership of the new MGM.
Someone with more financial knowledge than I should correct me if I'm wrong. My assumption is that if the Indian company paid around $2 billion for around $4 billion in debt, the creditors would get 50 cents or less on the dollar. If they trade debt for equity, they stand to gain more than 50 cents on the dollar, assuming MGM can be made successful. (That's the job of the Spyglass people.) With James Bond and The Hobbit as assets, a successful MGM is quite likely--eventually. We shouldn't forget that The Hobbit won't start paying off big until, assuming a December, 2012 release, early 2013. If the creditors are taking the Indian conglomerate's bid seriously, they are presumably now weighing which option is more advantageous to them--half payment now or potentially full payment or even a profit in three years. And we don't know what MGM's share in the overall revenues from The Hobbit will be.
So though it looks obvious to us that these people would make a lot of money if they just decide to let MGM go ahead and produce it, creditors who are owed a lot of money and aren't Tolkien fans may have a very different perspective. I for one think that this new Indian bid is probably just a last-minute distraction, but that's just a guess.
Someone with more financial knowledge than I should correct me if I'm wrong. My assumption is that if the Indian company paid around $2 billion for around $4 billion in debt, the creditors would get 50 cents or less on the dollar. If they trade debt for equity, they stand to gain more than 50 cents on the dollar, assuming MGM can be made successful. (That's the job of the Spyglass people.) With James Bond and The Hobbit as assets, a successful MGM is quite likely--eventually. We shouldn't forget that The Hobbit won't start paying off big until, assuming a December, 2012 release, early 2013. If the creditors are taking the Indian conglomerate's bid seriously, they are presumably now weighing which option is more advantageous to them--half payment now or potentially full payment or even a profit in three years. And we don't know what MGM's share in the overall revenues from The Hobbit will be.
So though it looks obvious to us that these people would make a lot of money if they just decide to let MGM go ahead and produce it, creditors who are owed a lot of money and aren't Tolkien fans may have a very different perspective. I for one think that this new Indian bid is probably just a last-minute distraction, but that's just a guess.
Kristin Thompson
Rohan
I notice there's no date on that leaked memo, and no overt reference to the Indian conglomerate's bid. It's the sort of memo that could have been issued directly after the seventh debt extension was announced. This makes me wonder whether it has any relation to the Indian bid. After all, the Spyglass deal as described in the trade journals involves many lay-offs at MGM as its distribution wing is dissolved. I'm sure the Spyglass deal has many MGM employees worried.
entmaiden
Super Moderator
Just based on the little we know, the debt may not automatically disappear if the Indian company purchased the shares of MGM. The purchase would be a negotiation between the buyers and the shareholders, and then the new owners would have to broker a separate deal with the creditors. Since MGM is in bankruptcy, the creditors have a seat at the table, so the purchase/settlement agreements are likely bundled together.
In a merger, there is no separation and the debt truly disappears as part of the transaction. If Spyglass is proposing a merger, they are working with the shareholders and the creditors and writing one deal.
The differences might be minor and might not be discernible to third parties, but the structure of the deal is important to all parties involved. Mergers are usually tax-free, but if creditors accept settlement of their debt for less than face value, under US law they owe taxes on the difference.
Because of the tax benefits, transactions must meet specific qualifications to be considered a merger. Spyglass is in a good position to merge their operations with MGM, but on the surface it does not appear that the bid from India will meet the criteria and will be considered a purchase.
In a merger, there is no separation and the debt truly disappears as part of the transaction. If Spyglass is proposing a merger, they are working with the shareholders and the creditors and writing one deal.
The differences might be minor and might not be discernible to third parties, but the structure of the deal is important to all parties involved. Mergers are usually tax-free, but if creditors accept settlement of their debt for less than face value, under US law they owe taxes on the difference.
Because of the tax benefits, transactions must meet specific qualifications to be considered a merger. Spyglass is in a good position to merge their operations with MGM, but on the surface it does not appear that the bid from India will meet the criteria and will be considered a purchase.