Turner Broadcasting System said Wednesday that it and Viacom International failed to agree on a projected joint venture at MGM/UA Entertainment and that Turner is proceeding with its original financing plan for its $1.5-billion MGM purchase. Completion of the sale is scheduled for Jan. 21.
At the same time, the Atlanta-based empire of entrepreneur Ted Turner stated publicly for the first time that it might sell off everything but the film library after it acquires Culver City-based MGM.
Thus, it might turn out that Turner himself would not become a Hollywood movie maker after all.
Turner Broadcasting specified Wednesday that it "intends to pursue the possible sale of all or part" of MGM's motion picture and television production, distribution and laboratory businesses, including real estate and the home-video operation. It said such a transaction could involve a joint venture relating to one or more of those businesses. However, it added, Turner will continue to operate the film and other businesses if they are not sold.
Reports of Difficulties
The statement supported Wall Street and movie industry reports that Turner's chief objective at MGM is the venerable studio's film library. The film collection would be a resource for his cable and broadcasting networks. At the same time, reports have persisted in Wall Street of difficulties by Turner and its investment banker in financing the MGM purchase.
In early November, Viacom, a cable and entertainment firm based in New York, disclosed that it is negotiating with Turner to buy "one or more of the businesses of MGM," including 50% of the studio and certain distribution rights. A possible sales price of $250 million circulated in the industry.
Wednesday's announcement said that Turner would promptly file an update of its original financing plan with the Securities and Exchange Commission. The plan, as stated in October, is to finance the purchase chiefly with proceeds from the sale of high-interest bonds.
"TBS has been advised by (investment banker) Drexel Burnham Lambert Inc. that it will proceed on the basis of that financing plan, notwithstanding the outcome of the Viacom discussions," the broadcaster's statement said.
A spokeswoman for Viacom said the company had no comment on Turner's announcement. None of the parties would comment on the reasons for the failure to conclude a deal.
Varied Reasons Cited
However, two sources said Turner backed out of a proposed deal after Drexel Burnham "had a problem financing the (MGM) deal" with the Viacom partnership factored in. Another source said he understood that Turner himself became angry at Viacom bargaining demands and pulled the plug on negotiations.
Turner's official announcement, however, did not rule out later dealings with Viacom. The carefully worded release said the parties "were unable to successfully conclude their negotiations . . . within the time constraints" of the MGM deal.
"We have to file with the SEC this week," a Drexel Burnham source said Wednesday. He said this was an urgent matter to clear the way for the timely mailing of MGM's proxy to its shareholders in advance of the Jan. 21 special meeting date set for their vote on the deal.
"We concluded we couldn't get a Viacom deal done in time. We are going to file and do the financing without them. We may or may not negotiate with them in the future."
In response to a question, the Drexel Burnham source said negotiations were going on "right up until yesterday (Tuesday) afternoon." He said the amended registration basically will only "delete Viacom material we were going to have in there."
As for the statement that most MGM businesses could be sold, the Drexel Burnham source said: "The library has always been the apple of his eye." However, he said the language was worded "to anticipate anything that might happen."
Analyst Steven Rosenberg of Paul Kagan Associates said the Turner firm's statement that it might sell everything except the MGM library "tells what (Ted Turner) is really interested in," adding:
"He wants to protect programming costs into the future. The best way is to buy a library. There's a monopoly on movie libraries."
Lee Isgur, an analyst with Paine Webber Mitchell Hutchins in New York, commented Wednesday on Turner's future course with the MGM deals:
"There are three possible outcomes. One, Turner goes belly-up. Two, he sells the whole thing (MGM) except the library for more than he paid for the whole thing and gets the library for nothing, then is acclaimed a genius. Three, he sells some of the stuff but not all and ends up having paid something for the library."
As an afterthought, Isgur added a fourth possibility: "He doesn't sell anything and he turns MGM around."
Dennis Forst, vice president of research at Seidler Amdec Securities in Los Angeles, said it appears that the MGM deal "gets more difficult as potential partners (for Turner) keep moving to the sidelines."
Asked whether it would be easier for Turner Broadcasting to sell the whole movie studio than to nail down a joint venture, Forst said: "Not unless he included the library. It is an integral cog in any production operation."
Turner has only half a distribution system to sell under the MGM purchase. The deal calls for 50-50 ownership of MGM's film distribution system with the new United Artists Corp., which is being spun off to Kirk Kerkorian, MGM's controlling (50%) shareholder, for about $480 million.
Times staff writer Kathryn Harris in Los Angeles contributed to this story.