Polygram leads bidding race for MGM

The bidding race has begun in earnest for the Hollywood lion - the Metro-Goldwyn-Mayer studios and its library of film titles - and analysts believe that Polygram, the UK-quoted music and film conglomerate, is a leader among the suitors.

Attention remains riveted on Polygram in spite of rumours last week that its Dutch majority shareholder, Philips, is opposed to the MGM purchase.

The most serious of the bidders will be invited to scrutinise the studio's books and interview the management as early as this week.

Others believed to be ahead in the running for MGM, valued by Wall Street analysts at about $1.5bn (pounds 1bn), include Rupert Murdoch's News Corporation, New Regency Enterprises, which is being backed by Time Warner, and at least one American cable television company. Viacom, the corporate owner of Paramount, is also thought to be eyeing the studio.

The current owners, a subsidiary of the French bank, Credit Lyonnais, have been blessed by fortuitous timing. After a dismal run of flops at the start of the decade, MGM enjoyed a string of lucrative box-office hits in 1995, notably with Get Shorty, starring John Travolta, and the most recent in the James Bond cycle, Goldeneye.

Doubts about Polygram's chances of buying MGM surfaced following a report last week in the Dutch newspaper, De Telegraaf. The article cited sources inside Philips saying that buying MGM would be "financially irresponsible".

Polygram quickly issued a statement insisting that it "is continuing its evaluation of MGM and is doing so with the full support of Philips".

Already a powerhouse in music and video distribution, Polygram currently has only a relatively minor film-making presence, notably through Gramercy Pictures and the Working Title production company that spawned Four Weddings and a Funeral. Some analysts have suggested that MGM has been seriously overpriced and is realistically worth only $850m, however.

Credit Lyonnais has long been looking to offload MGM, which it inherited when loans made to the studio's previous owner could not be repaid. Lazard Freres is handling the sale for the bank in New York.