MGM Raises Stakes in Vivendi Auction

16 July 2003

Metro-Goldwyn-Mayer is reportedly threatening to quit Vivendi Universal’s US asset auction despite raising its offer.

The moviemaker is one of five contenders still bidding for Vivendi’s stateside assets, which include cable-TV channels, theme parks and Universal Studios.

MGM chief executive Alex Yemenidjian reputedly sent a letter early this week offering to raise the group’s initial bid to $11.5 billion (an increase of $300 million), but only if certain information is released by 5pm Monday – otherwise it will walk away. The details MGM is so keen to view are said to include arrangements for the Vivendi channels’ carriage on cable and satellite TV platforms.

The tactic is known in business circles as an ‘exploding offer’, and is normally regarded as a last-ditch attempt to force an unreasonable seller’s hand. However, should Vivendi call MGM’s bluff, the US studio would face a choice between swallowing its pride or abandoning its bid for the assets.

MGM’s motives for the demand are unclear, not least because those in the know say Vivendi was planning to release some of the requested information anyway. One possibility is that it may be trying to resolve the auction before Vivendi executives go on holiday in August and before rival bidders have time to respond to the raised offer.

Data sourced from: The Wall Street Journal Online; additional content by WARC staff