Since most of the movies from HD Cinema comes from MGM, What impact could this have on HD Cinema and on everybody. It looks like Sony and Comcast will have the upper hand in this.
Source
MGM (MGM: Research, Estimates), the 80-year-old studio that owns the James Bond movies, said Monday that the unit of Japanese electronics giant Sony Corp. (SNE: Research, Estimates) would be joined by Providence Equity Partners Inc., Texas Pacific Group and DLJ Merchant Banking Partners.
Sony said it had reached a separate agreement with the top U.S. cable TV operator, Comcast Corp. (CMCSA: Research, Estimates), for Comcast to offer Sony and MGM movies over its video-on-demand systems and on new cable channels that it would form with the Sony group.
Emerging as victor in a drawn-out acquisition battle with Time Warner Inc. (TWX: Research, Estimates), Sony will join forces with MGM to create the world's largest film library of about 7,600 titles, comprising some 3,500 movies from Sony and about 4,100 from MGM.
Sony will pay $12 cash per share for MGM, controlled by billionaire Kirk Kerkorian, and assume about $2 billion of debt.
With roughly 237.6 million MGM shares outstanding at the end of July, the total value of the deal is about $4.85 billion.
The purchase of MGM is in keeping with Chief Executive Nobuyuki Idei's vision of creating synergies between Sony's consumer electronics products and music, movies and games.
But investors said it would be some time before the potential merits of the deal become clear.
"This will obviously help diversify earnings and it's an important library, an important source of content," said Marc Desmidt, head of Japanese equities at Merrill Lynch Investment Managers in Tokyo. "But I've got no idea (right now) if they've overpaid or not -- whether it's the right price."
Some analysts had questioned the logic of the deal for Sony, saying the company should be concentrating management resources on its struggling electronics division, which accounts for $45 billion or two-thirds of the company's total sales.
Sony's shares slid 1.52 percent to ¥3,890 Tuesday, underperforming the Nikkei average, which rose 0.4 percent.
Credit rating agency Standard and Poor's said after the market close that it had put Sony on watch for a possible downgrade because the acquisition could cause deterioration the company's balance sheet and hamper structural reform.
Sources close to the bid said Providence would contribute $450 million, Sony and Texas Pacific $300 million and DLJ Merchant Banking $250 million. The balance would be in debt.
Film library coveted
MGM's film library is considered its crown jewel, generating a stream of revenue in the DVD market.
Sony could also plumb the MGM library for sequels, and MGM's trademark Leo the Lion is a globally recognized brand.
Including the titles owned by Sony Pictures Entertainment, the Sony group will now control about 40 percent of all movies ever produced by Hollywood, according to some estimates.
Sony, which bought Columbia Pictures in 1989 for $3.4 billion, will control the MGM venture. Comcast will manage the joint venture the two concerns will form for cable TV.
An agreement, if finalized, would mark a sweet payout for 87-year-old Kerkorian, who holds a 74 percent stake in MGM and stands to make about $2 billion on the deal.
Earlier this year, he pocketed about $1.4 billion through an $8 per share dividend, meaning he'd walk with about $20 per share for owning the studio a third time in its long history.
The announcement of the deal by MGM came after Time Warner withdrew, saying it could not reach agreement on price.
Time Warner, the world's biggest media company, had offered $4.6 billion, according to one source.
The company -- parent of CNN/Money -- is now free to focus on a pending auction for bankrupt cable operator Adelphia Communications.
For Sony, owning MGM could also advance its cause in the battle to establish the next DVD format.
Sony is part of a consortium that supports the Blu-ray format against a format called HD DVD, which is endorsed by Japan's NEC Corp. and others.
Both HD DVD and Blu-ray technologies use blue laser light, which, with a shorter wavelength than red light used in conventional DVD recorders, can read and store data at much higher densities needed for high-definition recordings.
"A close relationship with holders of movie content will be necessary to win the DVD format fight. The purchase of MGM can be viewed as positive in that light," said UFJ Tsubasa's Yamamoto.
Source
MGM (MGM: Research, Estimates), the 80-year-old studio that owns the James Bond movies, said Monday that the unit of Japanese electronics giant Sony Corp. (SNE: Research, Estimates) would be joined by Providence Equity Partners Inc., Texas Pacific Group and DLJ Merchant Banking Partners.
Sony said it had reached a separate agreement with the top U.S. cable TV operator, Comcast Corp. (CMCSA: Research, Estimates), for Comcast to offer Sony and MGM movies over its video-on-demand systems and on new cable channels that it would form with the Sony group.
Emerging as victor in a drawn-out acquisition battle with Time Warner Inc. (TWX: Research, Estimates), Sony will join forces with MGM to create the world's largest film library of about 7,600 titles, comprising some 3,500 movies from Sony and about 4,100 from MGM.
Sony will pay $12 cash per share for MGM, controlled by billionaire Kirk Kerkorian, and assume about $2 billion of debt.
With roughly 237.6 million MGM shares outstanding at the end of July, the total value of the deal is about $4.85 billion.
The purchase of MGM is in keeping with Chief Executive Nobuyuki Idei's vision of creating synergies between Sony's consumer electronics products and music, movies and games.
But investors said it would be some time before the potential merits of the deal become clear.
"This will obviously help diversify earnings and it's an important library, an important source of content," said Marc Desmidt, head of Japanese equities at Merrill Lynch Investment Managers in Tokyo. "But I've got no idea (right now) if they've overpaid or not -- whether it's the right price."
Some analysts had questioned the logic of the deal for Sony, saying the company should be concentrating management resources on its struggling electronics division, which accounts for $45 billion or two-thirds of the company's total sales.
Sony's shares slid 1.52 percent to ¥3,890 Tuesday, underperforming the Nikkei average, which rose 0.4 percent.
Credit rating agency Standard and Poor's said after the market close that it had put Sony on watch for a possible downgrade because the acquisition could cause deterioration the company's balance sheet and hamper structural reform.
Sources close to the bid said Providence would contribute $450 million, Sony and Texas Pacific $300 million and DLJ Merchant Banking $250 million. The balance would be in debt.
Film library coveted
MGM's film library is considered its crown jewel, generating a stream of revenue in the DVD market.
Sony could also plumb the MGM library for sequels, and MGM's trademark Leo the Lion is a globally recognized brand.
Including the titles owned by Sony Pictures Entertainment, the Sony group will now control about 40 percent of all movies ever produced by Hollywood, according to some estimates.
Sony, which bought Columbia Pictures in 1989 for $3.4 billion, will control the MGM venture. Comcast will manage the joint venture the two concerns will form for cable TV.
An agreement, if finalized, would mark a sweet payout for 87-year-old Kerkorian, who holds a 74 percent stake in MGM and stands to make about $2 billion on the deal.
Earlier this year, he pocketed about $1.4 billion through an $8 per share dividend, meaning he'd walk with about $20 per share for owning the studio a third time in its long history.
The announcement of the deal by MGM came after Time Warner withdrew, saying it could not reach agreement on price.
Time Warner, the world's biggest media company, had offered $4.6 billion, according to one source.
The company -- parent of CNN/Money -- is now free to focus on a pending auction for bankrupt cable operator Adelphia Communications.
For Sony, owning MGM could also advance its cause in the battle to establish the next DVD format.
Sony is part of a consortium that supports the Blu-ray format against a format called HD DVD, which is endorsed by Japan's NEC Corp. and others.
Both HD DVD and Blu-ray technologies use blue laser light, which, with a shorter wavelength than red light used in conventional DVD recorders, can read and store data at much higher densities needed for high-definition recordings.
"A close relationship with holders of movie content will be necessary to win the DVD format fight. The purchase of MGM can be viewed as positive in that light," said UFJ Tsubasa's Yamamoto.
