by Marc Lavine
LOS ANGELES, Sept 13 (AFP) - A group led by Japan`s Sony Corp. struck an agreement in principle Monday to acquire Hollywood`s last major independent studio, Metro-Goldwyn-Mayer, after Time Warner dropped its bid, sources said.
Sony agreed to stump up nearly five billion dollars for what was once Tinseltown`s greatest dream factory after US media giant Time Warner withdrew its offer after it was outbid, according to reports.
"There is an agreement in principle, but no definitive agreement yet," a source close to the negotiations told AFP, declining however to reveal details of the deal which would award Sony MGM`s precious film library.
Entertainment industry insider Daily Variety said the consortium led by Sony upped its offer to 12 dollars per share, or a total of around 2.94 billion dollars, and also agreed to assume two billion dollars of MGM`s debt.
The Sony-led group, which includes Texas Pacific Group and Providence Equity Partners, increased its offer at the weekend after five months of intense by secret negotiations to clinch the deal.
Sony`s move prompted Time Warner to withdraw its offer early Monday after it refused to pay more than 11-dollars per share, or between 4.5 billion and 4.6 billion dollars, for the acquisition of the venerable studio.
Sony also offered MGM a 150-million-dollar, non-refundable deposit in the event that it fails to ultimately sign a merger agreement with one of Hollywood`s oldest studios, the Wall Street Journal said.
Time Warner said in a statement that while MGM was a tempting acquisition, the bidding had become too expensive for the US group`s taste.
"Although MGM is a valuable asset, we have decided to withdraw our bid. As we pledged to our shareholders, we approach every potential acquisition with strict financial discipline," Time Warner chief Dick Parsons said.
"Unfortunately, Time Warner could not reach agreement with MGM at a price that would have represented a prudent use of our growing financial capacity.
"We are confident that there are other capital allocation choices that will enable us to continue to build shareholder value," the company`s chairman and chief executive said.
Investment bankers J.P. Morgan Chase and Credit Suisse First Boston will provide debt financing for Sony`s acquisition of MGM, which boasts a valuable film library featuring the James Bond series, Variety reported.
Both Sony, which already owns a major Hollywood production studio, Sony Pictures Entertainment -- which features as its centrepiece MGM`s original lot in Los Angeles -- and Time Warner have been in acquisition talks with MGM since April.
Sony briefly won excusive negotiating rights but the deal was opened up to other potential buyers, notably Time Warner, after Sony initially declined MGM`s asking price of around five billion dollars.
But according to reports, a deal struck between Sony and US cable television broadcaster Comcast sealed its apparently successful bid.
Comcast will reportedly not inject any cash into the acquisition, but agreed to re-package MGM and Sony movie content for potentially lucrative video-on-demand services, allowing Sony to justify the higher asking price for the studio.
MGM is controlled by 87-year-old billionaire Kirk Kerkorian, who would be selling the famed Hollywood film studios for the third time if the deal is finalised.
Kerkorian acquired MGM from French banking group Credit Lyonnais in 1996 following a major fraud scandal involving top executives.
Kerkorian has bought MGM three times since in 1969. He sold it to media mogul Ted Turner in 1986 -- who sold off part of its library -- and has pumped an estimated four billion dollars into the studio since 1996.
MGM has a catalogue of some 4,000 films, including the James Bond, Pink Panther and Rocky series, as well as films including "The Wizard of Oz."