MGM

"In March 1993, I flew to New York to meet François Gille, the multilingual managing director of Crédit Lyonnais, which now reluctantly owned MGM. After a leisurely conversation about the south of France and our mutual love of the region’s cuisine, we turned to the studio. Gille had met with eight leading investment banks. All offered the same advice: to deal with its $3.2 billion in troubled entertainment assets, the bank should break up MGM, lay off its 2,400 employees, and sell what assets were left, mainly the lion logo and sister studio United Artists’s 1,100-title film library. (MGM’s library already belonged to Ted Turner, and Lorimar already owned the famous studio lot.) On paper, that course seemed prudent, as the studio was burning through a million bucks a day. Total liquidation could shave the bank’s losses to $900 million. I said, “I have a different point of view. I think you should put another $150 million into MGM so it can start distributing movies again.” “And why would that be best?” “Because your bank wants to open branches in New York and do more business in America. It would be terrible public relations to fire more than a thousand Americans and plow the MGM name underground for good.” After letting that point sink in, I said, “I believe I can get you most of your money back, if not all of it.” CAA could jump-start the studio with a few movie packages, which would buy the French time to revive UA’s tent-pole franchises: Rocky, the Pink Panther, James Bond. New production would boost the older titles’ value. When Crédit Lyonnais eventually sold MGM, as required by the feds, it would get a much better price. Gille said, “No one else agrees with you.” I stayed impassive, but my heart leaped. In any multiplayer contest, you want to be the outlier. I told Gille, “Everyone you’ve met with is in the business of selling assets. But I’m in the business of building assets, and I think you are, too.” “You’ve given me a lot to think about,” he said."

"the meantime, Kerkorian had acquired another piece of Las Ve¬ gas real estate for $5 million. He launched a new company, Interna¬ tional Leisure, to construct the world’s largest casino on the site. Financed through a public offering of 17 percent of International Leisure’s shares, the International was an immediate success. Along the way, Kerkorian bought the Flamingo in order to acquire experienced staff, hired a skilled manager who turned it into a highly profitable in¬ vestment, and decided to keep the casino. By late 1969, Kerkorian was sitting on International Leisure stock worth SI80 million, the fruit of an investment of just SI6.6 million. Adding in his Western Air Lines and MGM holdings, plus other assorted assets, Fortune estimated his total net worth at more than S260 million.16"

"A generally favorable Forbes 1997 article contended that Kerkorian had never preyed on companies, in the customary sense of “pressing every advantage, picking every bone clean.”26 The author further argued that he had not taken advantage of minority shareholders. According to an unnamed executive, who was otherwise critical of Kerkorian’s man¬ agement of MGM, “If you invested with Kirk, you had every advantage he did.”27"

"Thrive on Deals 205 to-day operations hold little appeal for him, but buying and selling com¬ panies clearly does, even when incumbent management fights him tooth and nail. “I don’t think he enjoyed being part of MGM or UA,” said Alan Ladd Jr. “What he liked was owning a movie studio that was for sale. And we were always for sale.”36"

"Another indication that I was out of my little league was meeting Kirk Kerkorian. He was an entrepreneur extraordinaire who had flown de Havilland Mosquitoes during World War II, after which he built an air-transport fleet and then proceeded to play on bigger and bigger stages with bigger and bigger businesses. He bought MGM when it was leaking money and floundering, after its long reign as the number one studio. At the same time, Kerkorian bought an airline that was also in trouble."

"On to Wall Street and New Investment Horizons 49 A Foothold at Loew’s By the end of 1958, Nathan Cummings’s group had acquired 235,000 shares from dissident Loew’s Inc. directors at $22 each. Buy' ing with him were his brother Maxwell Cummings, a reahestate op' erator and developer in Montreal, and Paul Nathanson, a Canadian film distributor. The move ended the threat of a proxy fight by a db rector, Louis A. Green, who had clashed with management over what he viewed as mismanagement of the MetrO'Goldwyn'Mayer movie'producing unit. Other sellers included two other dissident directors—Joseph Torm linson and Jerome A. Newman. Tomlinson, a year earlier, had threat' ened a proxy fight over management’s plan to spin off Loew’s Inc.’s Canadian and U.S. movie theaters and its WMGM radio station, leaving MGM as an independent studio—a plan the courts had ap- proved. Cummings’s aim was to ensure that the plan could be com' pleted. He wanted to end up with MGM after the spinoff. By 1959, the Tisches had accumulated $69 million in hotel profit. Buying Loew’s shares ultimately would require tapping about 15 pen cent of that cash. That March, Loew’s Theatres was formally sepa' rated from Loew’s Inc.—soon to be renamed MetrO'Goldwyn'Mayer. Existing shareholders got a half share in each of the two new com' panies for each preTreakup share held. Tisch called Cummings and said, “What do I do now?” Cummings offered to buy Tisch’s MGM shares. “So I sold him my MGM stock and I still owned the Loew’s Theatre stock, and at that time the price of the stock was $14. I knew enough to know that $14 for a company without debt and $10 or $12 [per share] in cash plus 100 theaters and a radio station was awfully reasonable—plus the of' fice building in New York and other office buildings. So I just kept buying the stock at $14. The stock was always $14.” Tisch wasn’t playing the market. Loew’s was an asset play made at' tractive by a persistently low, stable stock price."

"When Stokes relayed that story to Bourke, the Fairfax advisor admitted giving him sixty days to scrape up a deposit — and that they were accepting a promissory note for the rest. So, said Stokes, he hasn’t got the deposit and he’s still got to find someone to back him? It was more accusation than question. ‘Two days later,’ recalls Stokes, ‘I pick up the paper and see Skase is off to the US to buy MGM. Then he’s off to Japan to raise money, which he doesn’t get.’ Amazingly, in July 1987, the man with no money was allowed take control of Seven on the strength of a shoeshine and a smile. That was when Stokes realised the game was out of control."