Amazon Nears Deal to Buy MGM

Amazon.com Inc. AMZN 1.31% is nearing a deal to purchase the Hollywood studio MGM Holdings for nearly $9 billion together with debt, mentioned individuals aware of the matter, a pact that will flip a movie operation based within the silent period right into a streaming asset for the e-commerce large.

An settlement might be introduced as early as this week, individuals near the state of affairs mentioned, assuming the talks don’t disintegrate on the final minute.

The deal would mark Amazon’s second-largest acquisition in historical past, behind its $13.7 billion buy of Entire Meals in 2017, and spotlight the premium that content material is commanding as streaming wars drive consolidation and drive greater gamers to bulk up with property that assist them compete.

The privately traded MGM was valued round $5.5 billion, together with debt, final December. Its inventory worth has soared in current days, from about $105 a share in mid-Might, earlier than talks have been reported, to roughly $140 a share Monday morning. The share worth reached $150 Monday afternoon, after The Wall Avenue Journal reported information of the anticipated deal.

The fabled film and TV studio had round $2 billion of long-term debt on the finish of March. It has lengthy been thought of in play, however employed funding banks LionTree LLC and Morgan Stanley late final yr to start a proper course of.

Information of the deal talks first emerged as AT&T Inc. agreed to mix its media property with Discovery Inc. and kind a brand new firm, a pact that’s anticipated to spark even additional media consolidation.

The talks between Amazon and MGM have been on-again, off-again for the reason that begin of this yr, individuals near each corporations mentioned. Amazon and MGM have been in unique talks in current weeks, the individuals mentioned. The MGM board was briefed on the matter Sunday evening, an individual near the state of affairs mentioned. There are not any ensures they may finally attain an settlement.

An acquisition of 1 probably the most iconic leisure manufacturers on the earth can be probably the most aggressive foray but by a tech large into Hollywood.

The studio is finest identified for classics corresponding to “Singin’ within the Rain,” in addition to “Rocky” and “The Pink Panther.” MGM has a library of titles, together with the James Bond franchise, that, in up to date Hollywood, is most beneficial as an asset that can be utilized to drive subscriber sign-ups to Amazon’s Prime Video streaming service.

MGM additionally has a TV studio whose exhibits embody the Hulu hit “The Handmaid’s Story” and FX’s “Fargo.” It additionally owns the premium pay-TV channel Epix.

The Hulu hit ‘The Handmaid’s Story’ is amongst exhibits from MGM’s TV studio.

Picture: George Kraychyk/Hulu/Related Press

MGM shares the James Bond franchise with a holding firm owned by the Wilson/Broccoli household, who co-own the copyright to current Bond motion pictures and management the way forward for the franchise. The subsequent James Bond film, “No Time to Die,” was repeatedly delayed because of the Covid-19 pandemic and is now scheduled for launch in October.

Whereas Amazon is getting an enormous library, the MGM classics corresponding to “The Wizard of Oz” and “Gone with the Wind” have been bought way back together with the remainder of the pre-1948 catalog and now belong to AT&T’s Warner Bros.

Forbes and The Data beforehand reported on Amazon’s curiosity in MGM.

Amazon has continued to speculate billions of {dollars} in its movie and TV operations in addition to stay sports activities to assist its Prime membership providing. The corporate is at present in manufacturing on a TV sequence primarily based on “Lord of the Rings,” which has a first-season finances of $465 million.

Amazon has spent tons of of tens of millions of {dollars} buying would-be theatrical releases from main studios, like Paramount Photos’ forthcoming “The Tomorrow Conflict” starring Chris Pratt. It additionally aggressively pursued a deal to stream motion pictures from Sony Photos Leisure on its service, an individual aware of that state of affairs mentioned. Sony Photos finally ended up reaching a multiyear settlement with Netflix Inc.

It’s also investing closely in stay sports activities. In March, Amazon struck a long-term deal to stream the NFL’s Thursday evening franchise at a median annual charge of $1.2 billion.

The MGM deal would mark the newest twist in what has been a rocky journey for the studio. In 2018, it fired then-chief govt Gary Barber for having preliminary conversations with Apple Inc. for a sale that valued the studio at greater than $6 billion. Since then, MGM has had no chief govt officer, as a substitute having an “workplace of the CEO” comprising executives throughout the corporate. Its board is chaired by Kevin Ulrich, co-founder of New York hedge fund Anchorage Capital Group, MGM’s largest shareholder.

MGM has weighed on its long-term hedge-fund shareholders lately, a number of of whom bought concerned round 2010 with the concept MGM’s worth might be boosted by a refresh of its movie and tv library and that they may then exit by an preliminary public providing or the sale of the studio. A deal would mark a long-awaited win for Anchorage and corporations together with Highland Capital Administration LP and Davidson Kempner Capital Administration LP, all of which transformed their debt to fairness when MGM emerged from chapter in late 2010.

MGM is finest identified for classics corresponding to ‘Singin’ within the Rain.’

Picture: DPA/Zuma Press

Ought to a deal be finalized between MGM and Amazon, it might heighten antitrust considerations for the know-how large, which is already on the heart of a number of probes due to its measurement and energy.

Congress, the Federal Commerce Fee and the European Union, amongst others, have been wanting into the way in which Amazon competes. A report final yr from Congress decided that Amazon had monopoly energy over its sellers. On the time, Amazon addressed the findings in a weblog put up. “All massive organizations entice the eye of regulators, and we welcome that scrutiny. However massive corporations are usually not dominant by definition, and the presumption that success can solely be the results of anti-competitive conduct is just fallacious,” it mentioned.

Colorado Rep. Ken Buck, the rating Republican member of the Home Antitrust Subcommittee that ready the report, expressed concern over a possible deal between Amazon and MGM.

“This proposed merger is yet one more instance of Huge Tech’s dedication to whole dominance in each sector of our financial system. If Congress doesn’t act quickly, there gained’t be a market Huge Tech doesn’t management,” Mr. Buck mentioned in a press release. Amazon didn’t instantly reply to a request for remark and an MGM spokeswoman declined to touch upon Mr. Buck’s assertion.

Members of Congress have additionally publicly criticized former Amazon offers, corresponding to its acquisition of Entire Meals, which they are saying ought to have had more durable scrutiny.

The Journal chronicled how entrepreneurs who’ve held talks with Amazon’s deal-making arm felt exploited by the Seattle firm. Amazon has mentioned respectable disputes about mental property are resolved in courts. Congress is predicted to introduce new laws, that if handed, would hamper the power of know-how giants to strike some massive offers.

Write to Juliet Chung at juliet.chung@wsj.com, Joe Flint at joe.flint@wsj.com and Erich Schwartzel at erich.schwartzel@wsj.com

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