Sony Tried to Buy MGM/UA but Price Was Too Steep

Sony Corp., the Japanese electronics giant that aspires to own a Hollywood movie studio, confirmed Tuesday that it has tried to acquire MGM/UA Entertainment Co. but backed off from the price tag--reportedly about $1 billion.

Negotiations, which had driven up MGM/UA’s stock price by 33% in the past three weeks, were broken off at the end of last week.

MGM/UA’s shares began to sink before official word that the negotiations had reached an impasse. The stock lost $1.375 a share Monday to close at $14.125 on the New York Stock Exchange. The decline continued Tuesday, with the stock losing another 37.5 cents to close at $13.75. MGM/UA shares had traded for $11.625 on Nov. 10, just before the rise began.

Jeffrey C. Barbakow, chairman of Beverly Hills-based MGM/UA, continued to refuse all comment Tuesday.

Sony broke its three-week silence Monday to say through its New York office that it was not then in “active talks” with MGM/UA, followed Tuesday with reports from Tokyo confirming that such talks had occurred but had later been broken off.

Kirk Kerkorian, who owns about 82% of publicly traded MGM/UA, has been seeking about $20 a share for its 50.3 million outstanding shares, according to the trade paper Daily Variety. An acquirer would also have to assume about $700 million in MGM/UA debt. Sony was said to have offered $16 a share but reportedly might have been willing to pay more.

However, there is always a possibility that negotiations could be revived down the road, a source close to the talks said Tuesday in Los Angeles. Kerkorian’s major deals have been known to take such turns in the past.

The source said Daily Variety’s report on the price range was essentially correct. However, he said, negotiations over which assets would be included in the deal were too fluid to specify where the talks fell apart.

Among other things, Kerkorian reportedly sought to keep rights to the MGM name and the Leo the Lion trademark, while Sony preferred to acquire the entire company.

The source also confirmed that a participant in the Los Angeles talks was Walter Yetnikoff, president of New York-based CBS Records, which Sony acquired last January for $2 billion. Yetnikoff’s office said Tuesday that he was not expected to return to his office until Thursday.

Sony has said publicly that one reason for seeking a movie studio is to obtain film product for a new generation of laser disc players.

“Sony wants to become a major entertainment house in the world in the 1990s,” Roy Hong, a securities analyst at First Boston Corp. in New York, said Tuesday. “I don’t know if it will be MGM or not, but Sony will eventually make a move into the movie business.”