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PolyGram bid seen at $1B
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August 26, 1998: 3:58 p.m. ET
Metro-Goldwyn-Mayer said to be latest to mull bidding for film studios
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NEW YORK (CNNfn) - Talks for the sale of PolyGram Filmed Entertainment, which has advanced to the next stages, likely will result in a price tag topping $1 billion, people familiar with the situation said.
Metro-Goldwyn-Mayer Inc. has become the latest entry into the fray, one person close to the situation said. Officials from both Hollywood studios were scheduled to meet Wednesday to discuss the possible acquisition.
Earlier this week, EMI Group PLC publicly confirmed that it is "one of a number of parties" also considering a bid. Pearson PLC and CANAL+ of France also have expressed interest.
The film business -- which include such studios as Gramercy Pictures -- are being sold as part of Seagram Co.'s purchase of the Dutch recording giant. The Canadian beverage and media company hopes to merge PolyGram's music business with its Universal Music Group subsidiary.
But, as always, price remains a sticking point, and those familiar with the talks said it is more difficult than usual to value the film company.
The equity portion of PolyGram Filmed Entertainment is estimated at $750 million. However, the price tag includes roughly $300 million of debt, which was film financing backed by Sumitomo Bank of Japan.
Collectively known as the "Sumitomo lease," the debt is secured by the studio's films, such as "Return to Paradise." The difficulty lies in valuing the debt, which is dependent on the success of the collateralized films.
"The question is: Will the pictures pay out?" one person familiar with the details said.
Officials of Seagram and MGM declined to comment. A PolyGram spokeswoman didn't return telephone calls. 
-- by staff writer Robert Liu
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