Speculation Swirls Around Amazon’s Potential $9 Billion MGM Takeover


It’s reported by The Washington Post that Amazon.com is on the cusp of clinching a monumental deal to buy MGM Holdings, with a price tag of about $9 billion. Those in the know suggest that a formal announcement outlining the details of the acquisition may come as soon as next week.

Amazon’s possible purchase of the iconic film studio has been a topic of industry gossip for some time. It has been mentioned in the same breath as Apple, another tech giant thought to be eyeing MGM, which has been on more solid footing since its 2010 exit from bankruptcy.

Leading the discussions on MGM’s side is Kevin Ulrich of Anchorage Capital, a former executive at Goldman Sachs. The push to find potential buyers accelerated in December of 2020 when MGM enlisted Morgan Stanley’s expert advice on a potential sale.

By last December, MGM’s valuation, debt included, hovered around $5.5 billion. However, amidst these acquisition talks, its stock price saw a noticeable increase, jumping from $105 per share to approximately $140 each as of Monday morning.

Amazon Launchpad

If this acquisition goes through, it would represent one of Amazon’s most sizable takeovers, second only to its previous $13.7 billion acquisition of Whole Foods in 2017. Such a move is indicative of the ongoing battle between streaming services to expand their collection of streaming content offerings.

MGM’s treasury of content includes more than 4,000 film titles and over 17,000 hours of television programming. This impressive collection from the storied studio features box office hits like the Rocky and Hobbit series, the iconic James Bond films, and popular TV shows such as Fargo and The Handmaid’s Tale, along with time-honored classics like “Singin’ in the Rain,” and “The Pink Panther.” It should be noted, however, that beloved oldies like “The Wizard of Oz” and “Gone with the Wind” were sold off with MGM’s pre-1948 catalogue and are now under the Warner Bros. banner, a subsidiary of AT&T.

Amazon is making significant strides in enhancing its Prime TV service, aggressively adding fresh content to maintain a competitive edge. Notably, the company is currently bankrolling a high-budget “Lord of the Rings” TV series, with its first season costing a staggering $465 million.

Previously, Amazon had set its sights on acquiring streaming rights from Sony Pictures Entertainment. However, Sony ultimately struck a deal with Netflix instead.

Moreover, Amazon Prime is branching out into sports streaming, having just inked a deal to broadcast NFL’s Thursday night games for a yearly sum of $1.2 billion.

MGM’s sell-or-not-to-sell indecisiveness is evident from past actions, like when it dismissed former CEO Gary Barber for entering into preliminary negotiations with Apple back in 2018, a move that resulted in Apple’s $6 billion valuation of MGM. Since Barber’s departure, the company has foregone traditional CEO leadership, preferring instead to be steered by a committee of top executives under Ulrich’s chairmanship.

Ever since its bankruptcy in 2010, all stakeholders in MGM have been strategizing on leveraging the company’s legacy to ramp up its value for a profitable sale, among these investors are Anchorage, Highland Capital Management LP, and Davidson Kempner Capital Management LP.

Should this sale to Amazon go forward, it’s bound to reignite antitrust debates.

Entities such as the US Federal Trade Commission and the European Union have been vocal about their reservations concerning Amazon’s business practices and perceived monopolistic tendencies.

Congressman Ken Buck of Colorado, a leading Republican member on the House Antitrust Subcommittee, has also voiced concern over the potential transaction between Amazon and MGM.

“This proposed merger is another testament to Big Tech’s aim for absolute dominance across all economic sectors. Without timely intervention from Congress, there soon won’t be an industry that Big Tech fails to control,” Buck stated.

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