Pathe, MGM/UA finally make a $1.3 billion deal.

Pathe, MGM/UA finally make a $1.3 billion deal

Pathe Communications, a $349.5 million company headed by Italian financier Giancarlo Parretti, was expected last week to complete its purchase of Beverly Hills-based MGM/UA Communications Co., which has been looking for a buyer for the past

As part of the $1.3 billion deal, MGM/UA shareholders are selling their stock to Pathe for $21.50 a share, $1.50 per share more than they originally bargained for, according to MGM/UA spokesman Scott Tagliarino.

"We set out to maximize the value to our shareholders and we accomplished what we set out to do. The shareholders are receiving a tremendous value for their ownership in the company," he said, adding that in the past the company has received offers in the $18 to $20 range.

MGM/UA is controlled by financier Kirk Kerkorian, who owns 80 percent of the company's stock. The stock closed at $17.375 per share on Oct. 25. In July, MGM/UA shareholders received $4 per share from Pathe toward the purchase of the company.

The price of the stock is close to the deal-striking price, which indicates the deal will close on the strength of the money in escrow, said Paul Marsh, an analyst with Los Angeles-based Bateman Eichler, Hill Richards.

Pathe's takeover of MGM/UA has come in stages. Pathe first made a bid for the $876 million entertainment company in March, and has been making payments toward the company's purchase since then.

By the middle of October, Pathe had deposited $353 million in an escrow account. On Oct. 22 Pathe announced it had placed the balance for the deal, $967 million, in escrow. The MGM/UA board of directors voted to accept Pathe's buyout offer on Oct. 24.

"We're very pleased with the vote and delighted the transaction is going through as planned," said Pathe spokesman Craig Parsons.

Pathe's financing of the deal comes from a variety of sources. About $600 million is from the European businessmen who run Pathe. They include Parretti, chief executive officer and president, and Florio Fiorini, chairman, according to Parsons.

The remainder will come from sales of assets, such the MGM/UA library. Turner Broadcasting System purchased the rights to show 1,000 titles on television during the next 10 years and Time Warner bought home video rights to the library for 12 years. The assets of MGM/UA's library include the James Bond, Rocky and Pink Panther films, as well as "West Side Story."

The Time Warner deal was worth $125 million and the Turner Broadcasting deal was made for an undisclosed amount, possibly as much as $400 million, Parsons said.

Turner already owned foreign and domestic distribution rights to MGM films that were produced before 1987. The new agreements cover films released theatrically by MGM/UA through December 1988, as well as some 1989 releases.

Analysts said they had difficulty predicting whether the deal would go through.

"Parretti is an impossible guy to get any straight information from. I don't think anyone was quite sure," said Craig Davis, director of research for R.D. Smith and Co. Inc. in New York.

Beverly Hills-based Qintex Entertainment Inc. made an offer for MGM/UA in 1988, and other companies, including Sony Corp. and Fox Broadcasting Co., expressed interest in buying the company.

If the deal goes through, MGM/UA will become the third major studio to be purchased by a foreign interest in recent years, following 20th Century Fox, which was purchased by Australia-based News Corp., and Sony Corp.'s purchase of Columbia Pictures Entertainment. In addition, Osaka, Japan-based Matsushita Electric Industrial Co. is currently in buyout talks with MCA Inc.

Also, Walt Disney Productions announced last week that it was going to finance its movie-making with a $600 million partnership transaction backed by Japanese investors.