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Rel Entertainment among 7 MGM bidders
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Metro-Goldwyn-Mayer (MGM) on Friday received seven first-round bids of between $1.5 billion and $2.5 billion, short of covering the $3.7 billion the studio currently owes to lenders.

According to agency reports, MGM’s current list of potential buyers include Time Warner, Lions Gate Entertainment, Summit Entertainment, Liberty Media, News Corp and Reliance Entertainment, owned by billionaire Anil Ambani.

These bids are non-binding, which means they can be withdrawn or amended without any legal consequences. A person close to the transaction said that four bidders, including News Corp and Reliance Entertainment, were considered to be serious.

First-round offers were allowed only for the entire studio. As of now, it’s far from clear if bids for select MGM assets or for film rights for particular franchises such as the James Bond or Pink Panther series of movies will be allowed in subsequent rounds. Of the bidders, Lions Gate is considered likely to file a second-round bid for the entire company. Agency reports state that it had offered $1.5 billion to buy the studio.

MGM is under no obligation to accept any of these bids. Its creditors, who are driving the process, expect the bid amount to cover a large chunk of the troubled studio’s debts. If these expectations are not met, MGM can opt for a court-supervised bankruptcy. A Reuters report said that MGM could consider a pre-packaged bankruptcy, along with the sales, by which it can clean up its balance sheet and reduces liabilities to make itself more attractive.

The Indian contender Reliance Entertainment made a big-bang Hollywood debut last year by agreeing to invest $825 million in Steven Spielberg’s DreamWorks Studios, one of the largest deals in global cinema in recent times. The figure of $825 million includes an investment of $325 million by Mr Ambani to buy a 50% stake in DreamWorks.

The bid for MGM is in line with Reliance Entertainment’s move to acquire global content. Reliance Entertainment already has partnerships with Hollywood A-Listers, such as Brad Pitt, George Clooney and Tom Hanks, apart from the deal with Mr Spielberg. The likelihood that Reliance Entertainment will put in a first-round bid was first reported by ET.

MGM studio is owned by a group of investors, including PE firms Providence Equity Partners and TPG, and Sony and Comcast, which acquired the studio in a $5-billion deal, that closed in 2005. MGM, which owns a movie library with about 4,000 titles, has begun evaluating the bids.

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