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By Kathryn Harris

Stop me if you’ve heard this one before. A wealthy financier buys a movie company, gets frustrated by its losses, and installs new deal-minded managers, who insist the company is not for sale. They even vow to produce a full slate of films.

If you recognize the current script at Metro-Goldwyn-Mayer Inc., there’s good reason. Controlling shareholder Kirk Kerkorian directed the same scenes in 1990 when the studio was called MGM/UA Communications Co. That year, the company was sold for cash.

What’s different in 1999? Kerkorian has sunk a lot more money into MGM, and he’s 82 years old. Estate planning might be on his mind. If he sells MGM for a cash profit, he’ll face a capital gains tax, and the remainder could be taxed a second time as part of his estate. Far better to pursue a stock swap and only pay taxes once, at time of death.

But finding a partner for MGM on Kerkorian’s terms will be difficult. He’s a fidgety shareholder who doesn’t hesitate to challenge incumbent managers, as he proved to Chrysler Corp. after he began accumulating its stock in 1990 with the proceeds from the MGM/UA Communications sale. Other corporate chiefs will think twice before welcoming Kerkorian into their tents. Widely reported talks with Cablevision Systems Corp. and Liberty Media Group have gone nowhere.

For now, MGM is offering a familiar-themed sequel: “We have absolutely no interest in selling. Our entire focus is on building the company,” as MGM Chairman Alex Yemenidjian told Bloomberg in March, a month before his appointment.

Yemenidjian ran an accounting firm until he went to work for Kerkorian’s Tracinda Corp. in 1990. In recent years, he has held senior posts at Kerkorian’s MGM Grand Inc. hotel and gaming company in Las Vegas.

In his new studio job, Yemenidjian has briskly swept out much of the prior management and announced a restructuring that will result in second-quarter charges of $225 million.

Around Hollywood, the moves are interpreted just one way: Dressing up MGM for sale.

Somewhere in MGM’s film vault, there is probably a canister containing old speeches of the many studio chiefs who served the restive Kerkorian since he first gained control of the company in 1969.

Yemenidjian could be borrowing from a 1990 speech made to shareholders by Jeffrey Barbakow, who was the fifth chief executive of MGM/UA Communications in as many years. On the heels of a failed effort to sell MGM to Australia’s Qintex Group, Barbakow (a former Merrill Lynch investment banker, now chairman of Tenet Healthcare Corp.) told MGM/UA shareholders the company would no longer seek a buyer and would return to film production.

Two months later, Kerkorian announced a deal to sell the company to Giancarlo Parretti, the Italian businessman who nearly bankrupted MGM.

But in 1996, Kerkorian startled Wall Street and Hollywood by reinvesting in MGM when the company was auctioned by its bankers.

In the past year, he has sunk another $1 billion into MGM stock, and the company is contemplating another rights offering to raise an additional $500 million. At present, Kerkorian holds an 89 percent stake in MGM, representing a total investment of $2 billion.

Because MGM has been unprofitable since 1996, the only way to recoup the investment anytime soon will be through a sale.

With the stock trading above $18 in recent days, the market capitalization already exceeds $2.7 billion. But MGM has never fetched much more than $1 billion in its several sales since 1985. What’s changed?

MGM has added to its film library, with the 1997 acquisition of Orion Cos. and the January purchase of the PolyGram NV film library.

Most significant, MGM agreed in March to buy its way out of an onerous home-video contract with Time Warner Inc.’s Warner Bros. movie studio, which had restricted its freedom to co-finance movies with other studios.

MGM should look more attractive and available to any suitor. Kerkorian “couldn’t sell the company until he got those rights back,” says one Wall Street investor, explaining why he promptly bought the stock at $11.

But as a standalone company, MGM must stay in the production and distribution business to “refresh” the library. And that’s an expensive proposition, even though MGM executives say they’ll hold their production budget to $350 million, or roughly half the sum spent by the leading studios.

Unfortunately for MGM, the company has suffered a cold streak at the box office, so there are no “Titanic”-like profits to finance the next film slate. Indeed, MGM released only five of the top 100 grossing films last year, according to data compiled by Variety.

The current box-office report tells a similar story:

MGM has just one film, “Tea With Mussolini,” in limited release now, with no other film due until August, when the company will distribute a remake of “The Thomas Crown Affair.”

The new managers have scaled back television production and a previously touted plan to develop consumer products to exploit the MGM name. About $140 million of the $225 million in second-quarter charges are film related, as the new broom sweeps out some of the prior regime’s projects.

There’s no assurance that the new managers will make better movies. Neither Yemenidjian nor Chris McGurk, the new vice chairman and chief operating officer, has filmmaking experience, although McGurk held senior financial and administration jobs at Walt Disney Co.’s studios and Seagram Co.’s Universal Pictures.

The game plan calls for picking cheaper projects, or finding co-financing partners on films and new cable networks. But MGM has sought control of proposed joint ventures, and that’s a turnoff to entrepreneurial cable-TV bosses. No one’s quite sure how Kerkorian will work his way out of this thicket. But he has always made money trading the MGM asset, not operating it. For old times’ sake, Hollywood may award a special Oscar if Kerkorian sells MGM for a profit again.

Kathryn Harris is a columnist for Bloomberg News.

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