Equity trio backs $3bn MGM buyout

Providence Equity, Texas Pacific and DLJ Merchant Banking have announced an agreement with Sony America to buy Hollywood studio Metro-Goldwyn-Mayer in a deal that would eventually distribute more than 4,100 movies via cable network Comcast.

Sony Corporation of America, along with private equity firms Providence Equity Partners, Texas Pacific Group and DLJ Merchant Banking Partners, have agreed “in principle” to acquire publicly traded movie studio Metro-Goldwyn-Mayer in a deal that values the Hollywood veteran at nearly $3 billion (€2.4 billion), according to a press release.

The individual participation levels of the various equity partners has not been disclosed.

The announcement represents the consortium’s apparent victory over rival bidder Time Warner, which dropped out over the weekend. The proposed buyout also includes roughly $1.9 billion in MGM debt.

Simultaneously, the winning consortium announced a deal by which MGM’s vast library of content, as well as Sony Picture’s assets, will be distributed over cable television giant Comcast’s pay-per-view platform. The joint venture will be managed by Comcast.

JP Morgan Chase arranged debt financing and CSFB is a co-underwriter.

Sony Corporation of America, based in New York, is the US subsidiary of Sony Corporation, headquartered in Tokyo.

Providence, Rhode Island-led Providence Equity, led by chief executive officer Jonathan Nelson, has been involved in some of the media world’s biggest buyouts. In May, the firm joined The Blackstone Group in purchasing California’s Freedom Communications, the publisher of The Orange County Register, for a reported amount of between $1.5 billion (€1.25 billion) and $2 billion (€1.67 billion). Providence made that investment out of its $2.8 billion Fund IV.

In April, Providence joined Kohlberg Kravis Roberts in the acquisition of satellite operator PanAmSat in a deal worth $3.55 billion (€2.98 billion).

This month, Providence Equity hired Gustavo Schwed as a managing director in its London office. Schwed joins the firm from Morgan Stanley Capital Partners, where he was a partner responsible for European private equity.