MGM/UA Sweetens Offer to Buy Back 15% of Unit

MGM/UA Entertainment said Tuesday that it will increase its offer to buy back the 15% stake of MGM/UA Home Entertainment Group that it doesn’t already own, as part of an agreement to settle a lawsuit with a dissident shareholder of the home entertainment company.

The Culver City-based motion picture company said it will pay $28 in cash for each share of the home entertainment firm, or about 25% more than it offered last December when it first offered subordinated notes in exchange for the outstanding shares.

The latest offer marks the third time that MGM/UA has sweetened its offer. Most recently, on April 2, MGM/UA proposed offering notes with a current value of about $27.50 per share.

MGM/UA said the agreement is designed to settle all claims brought by motion picture exhibitor Sumner Redstone, who sued MGM/UA on April 3. Redstone, who controls 7.9% of the home entertainment firm, stated in a New York federal court suit that MGM/UA breached an agreement allegedly negotiated with Redstone on March 28 to pay a current value of $30 per share to all shareholders.

MGM/UA said it will make a public offering of notes to raise the cash required for the deal, which has an indicated value of $126 million. Arthur Rockwell, a vice president of the motion picture company, said he expects MGM/UA to offer 10% series A senior subordinated notes due April 15, 1993, with a face value of $35 or slightly more to finance the deal.

MGM/UA said the revised merger is subject to several conditions, including completion of a settlement agreement with two shareholders who filed suit in Delaware. But MGM/UA noted that, if the merger is not completed by Aug. 1, Redstone has agreed to sell his shares back to MGM/UA for $28 per share in cash.