Originally created 04/28/04

Metro-Goldwyn-Mayer approves one-time $8 per share dividend



LOS ANGELES -- Film studio Metro-Goldwyn-Mayer Inc. declared a one-time dividend of $8 Monday, even amid speculation the venerable studio could soon be sold.

MGM said its board approved the special payment Monday. Shareholders of record at the close of business on May 7 will be paid the dividend on May 17, the company said.

MGM's largest shareholder is billionaire Kirk Kerkorian through his Tracinda Corp. holding company. Kerkorian owns about 74 percent of MGM's shares and stands to make about $1.4 billion from the dividend.

The company said it expects that the dividend will qualify as a tax-free return of capital to shareholders.

The company is using cash from a new refinanced credit facility, including $2 billion in term loans and a $400 million revolving line of credit, to pay the dividend. Essentially, the studio is leveraging several years of expected cash flow to pay the dividend.

MGM is in talks to be acquired by Sony Corp. and two private investment companies, according to a source familiar with the talks. Sony is mainly interested in acquiring MGM's library of more than 4,000 films, including profitable film franchises such as the "James Bond" series.

For nearly two years, MGM has been seeking to become larger either through an acquisition or merger. The company made an unsuccessful bid for Universal Studios last year.

"Our strong cash flow and our confidence in our ability to continue to generate strong cash flow are the principal reasons why we decided to reward our shareholders with an extraordinary dividend of $8 per share," said Alex Yemenidjian, MGM's chairman and chief executive officer.

Yemenidjian also said the company's new credit facility gives it enough operating cash.

In addition to movies, MGM also operates cable and satellite television channels around the globe and produces television shows, including "She Spies" and "Stargate SG1."

MGM said earlier this month it would recommend its board approve the dividend. The shares have surged 15 percent since then, closing Monday down 10 cents at $20.17 on the New York Stock Exchange before the dividend announcement was made. In after-hours trading the shares gained 3 cents.