MGM Sees No Bargain at Vivendi

Metro-Goldwyn-Mayer MGM says its shopping trip is over. But the company's major shareholder is just getting started.

MGM announced Tuesday evening that it is withdrawing its $11.5 billion all-cash offer for Vivendi Universal Entertainment, the U.S. media and entertainment subsidiary of Paris-based Vivendi Universal V.

Almost simultaneously, Las Vegas billionaire Kirk Kerkorian -- the octogenarian who owns two-thirds of MGM's stock -- announced a tender offer for 19% of the company's shares that he doesn't already own.

In after-hours trading Tuesday, MGM's shares jumped $1.92, or 15%, to trade at $14.76. Vivendi's shares dropped a penny from their official closing price of $18.51.

While the impact of MGM's move on Vivendi's auction of VUE is unclear, Kerkorian's offer for MGM shares illustrates once again Kerkorian's unflagging restlessness as far as the value of his investments is concerned.

"We believe that recent trading prices of MGM's common stock do not reflect MGM's full value and that the stock represents an attractive investment," Kerkorian said in a statement. "This tender offer demonstrates our confidence in MGM and our commitment to the company's future."

Kerkorian is offering to pay up to $240 million, or $16 per share, for as many as 15 million shares of MGM's common stock. That price represents a 24.6% premium over MGM's closing price of $12.84 Tuesday.

In contrast, MGM says it doesn't believe VUE is much of a value. "The VUE assets are attractive and would fit well with MGM," chief executive officer Alex Yemenidjian said in a statement. "Unfortunately, meeting the seller's current price expectation would not be consistent with our valuation of the assets."

MGM didn't make clear in its statement whether VUE had requested a higher bid, or whether MGM had decided that the assets for which it had bid were not worth as much as the company had believed originally. An MGM spokeswoman wasn't immediately available for comment.