MGM Pulls Out of VUE Bidding

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Once thought to be one of the front-runners for Vivendi Universal’s U.S.
entertainment assets, Metro-Goldwyn Mayer Inc. has dropped out of the
bidding.

In a prepared statement, MGM chairman and CEO Alex Yemenidjian said the
bidding for Vivendi Universal Entertainment just got too rich for the Hollywood
studio.

"The VUE assets are attractive and would fit well with MGM," Yemenidjian
said. "Unfortunately, meeting the seller’s current price expectation would not
be consistent with our valuation of the assets. MGM is a disciplined buyer, and
we will not pursue strategic opportunities, however attractive, unless we can do
so on a basis that makes sense for our shareholders. We continue to have a high
regard for Vivendi and its management."

MGM said in the statement that it has withdrawn its $11.5 billion all-cash
offer for the assets, which include cable channels USA Network, Sci Fi Channel,
Trio and NewsWorld International; Universal Studios; and the Universal theme
parks.

According to sources, Vivendi had been asking in excess of $14 billion for
the assets.

With MGM out of the picture, that leaves Liberty Media Corp., Viacom Inc.,
General Electric Co.’s NBC television unit and a group headed by former Vivendi
vice chairman Edgar Bronfman as the remaining bidders.

However, it is unclear whether those bidders -- which had submitted earlier
bids thought to be lower than MGM’s -- would be willing to pay as high a price
as Vivendi is asking.

In a separate matter, MGM announced that Tracinda Corp. -- headed by MGM’s
largest shareholder, Kirk Kerkorian -- has made a tender offer for 15 million
MGM common shares at $16 apiece, a 26% premium over the stock’s current trading
price.

The deal would boost Kerkorian’s holdings in MGM from about 67% of
outstanding common shares to 73%.

"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 prepared statement. "This tender offer demonstrates our
confidence in MGM and our commitment to the company's future."

No date for the tender offering has been set yet. Although this seems
strikingly similar to a plan to share the wealth with MGM shareholders that
Yemenidjian outlined in the company’s second-quarter conference call last week,
sources familiar with the situation said it is a totally separate
deal.

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