MGM/UA reaches agreement to give Pathe more time to arrange financing for buyout.MGM/UA reaches agreement to give Pathe more time to arrange financing for buyout Buyout The purchase of a company or a controlling interest of a corporation's shares. Notes: A leveraged buyout is accomplished with borrowed money or by issuing more stock. Pathe Communication Corp. and MGM/UA Communications last week said they had reached an agreement that will give Pathe more time to arrange financing. As part of the agreement, Pathe will up its price for MGM/UA common and preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. to $21.50, from the $20-a-share cash offer that was on the table. The agreement makes Pathe's bid for MGM/UA worth an estimated $1.31 billion, up from $1.22 billion. The new deal will give Giancarlo Parratti, president of Pathe, until Oct. 23 to arrange financing and close the deal. The drop-dead deadline had been June 23. Pathe has already made $200 million in deposits into an escrow escrow Instrument, such as a deed, money, or property, that constitutes evidence of obligations between two or more parties and is held by a third party. It is delivered by the third party only upon fulfillment of some condition. account for MGM/UA. Under the terms of the new agreement, Pathe must deposit another $53 million into the escrow account July 16. On July 21, a payment of $4 a share will be made to stockholders from the $253 million escrow account. On Aug. 21 and Sept. 20, two escrow installments of $50 million each are due. The balance, an estimated $857 million, is due on Oct. 23. On Wall Street, MGM/UA's stock closed at $16.50 on Thursday, down from $18.50 on Monday and well below the $21.50-a-share cash offer. The agreement gives Giancarlo Parretti and Florio Fiorini, chairman of Pathe, more time to finalize fi·nal·ize tr.v. fi·nal·ized, fi·nal·iz·ing, fi·nal·iz·es To put into final form; complete or conclude: "They have jointly agreed ... a complex deal that includes a $650 million loan from Time Warner Time Warner Inc. (NYSE: TWX), formerly known as AOL Time Warner, is the world's largest media and entertainment conglomerate headquartered in New York City, with major operations in film, television, publishing, Internet service and telecommunications. Inc. Parretti is reportedly having trouble in acquiring privotal equity properties needed for the purchase. He needs an estimated $600 million in equity properties to arrange the financing. Parretti has attempted to buy Pathe Cinema SA, a France-based chain of 400 movie theaters and a 400-title film library for more than a year. Completely separate from Los Angeles-based Pathe Communications Corp., the cinema chain is considered by entertainment insiders to be an important piece of the equity financing Equity Financing The act of raising money for company activities by selling common or preferred stock to individual or institutional investors. In return for the money paid, shareholders receive ownership interests in the corporation. needed to buy the lion. |
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