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Kevin Ulrich took home a $ 2 billion win over MGM. It only took a decade

(Bloomberg) – Hedge funds often measure their investments in minutes, not decades; but for Anchorage Capital Group, its long-standing stake in Metro-Goldwyn-Mayer Studios Inc. proves that patience can pay off, too. The New York-based fund manager is expected to earn around $ 2 billion from his film and television investment. producer, one who started almost 11 years ago with MGM in bankruptcy court. Amazon.com Inc. agreed to buy the company for $ 8.45 billion on Wednesday, a price that includes just under $ 2 billion in debt. The deal is in many ways a justification for Kevin Ulrich, the former Goldman Sachs Group Inc. trader who co-founded Anchorage in 2003 and was part of a group of troubled debt investors who took control of MGM during the restructuring process. In recent years, participation seemed to be an albatross for the fund, which came with significant drama in itself. Ulrich recruited and then fired a high-level CEO, resisted activist investor Carl Icahn’s efforts to gain control, and held out for a bigger paycheck after years of thinking about various exit strategies. By selling now, when demand for media content from entertainment and tech companies is booming, he proves his long-standing confidence in investing was justified. “There was a lot of maneuvering, a lot of financial engineering,” said Steven Azarbad, chief investment officer at Maglan Capital in New York, an MGM investor who sold his shares four years ago. “But they did a good job.” A representative from Anchorage declined to comment. When Ulrich first invested in MGM, he was new to Hollywood. He helped choose Gary Barber, a South African producer of films such as “Ace Ventura: Pet Detective” as general manager of the legendary but debt-laden studio. Barber brought a keen sense of business and connection to a world Ulrich has long admired from afar. Barber led MGM’s development of the “The Hobbit” franchise, a co-production with Warner Bros., which became a worldwide success. He directed the release of the James Bond film, “Skyfall,” which grossed over $ 1 billion at the box office, and he revived the studio’s work on television. Barber also brokered a deal to bring in TV super-producer Mark Burnett, who gave MGM access to hit reality shows like “Survivor” and “The Apprentice,” but which would end up becoming personally awkward. 2012, the company bought back Icahn’s shares for $ 590 million. . He also filed documents for a possible public offering of shares and considered other options, such as a sale. As Barber boosted MGM’s film and television pipeline, Ulrich grew increasingly fascinated with the allure of Hollywood. He became a regular at film premieres in Los Angeles and New York, and frequented industry parties in the Hamptons and elsewhere. He became active in creative decisions after becoming chairman of the MGM board – somewhat unusual for a non-executive with no Hollywood background – even getting involved in business granularities like casting. Ulrich. When it was time to renew Barber’s contract in 2017, Ulrich conducted an extensive search for a new CEO. In the end, he ultimately chose to sign Barber on a new five-year deal. Yet around the same time, the two separated over whether to sell the business, with Ulrich wishing to hang on to the studio and Barber saying it was time to find a buyer. investors who would end up being unsuccessful. Just months after Barber’s deal was renewed, Ulrich fired him. The shock start meant the company had to pay Barber five years’ salary and buy back his stock, a total of $ 260 million. In the three years since Barber left, Ulrich has not replaced him, instead operating an “office of the CEO,” made up of various people who each have their own personal views of MGM. Barber declined to comment through his spokesperson. During the initial period of success following the restructuring, gains became more difficult to achieve, as they did in all of Anchorage’s credit-focused business. Two senior executives left the firm in January 2020 and another in November. Anchorage’s flagship strategy, with around $ 8.5 billion under management, only returned 0.6% in 2018, 1.5% in 2019 and 4.4% in 2020, according to people familiar with the matter In December, MGM hired investment bankers for a potential sale. MGM only released one movie in theaters in 2020. Its biggest potential hit, the latest Bond film, “No Time to Die,” was pushed back. from last year to October due to the pandemic. Media companies to tech giants have sought to create video streaming platforms that can compete with industry leader Netflix Inc. Revenue jumped 48% last year, to around $ 307 million. dollars, even as sales were declining. $ 2.5 billion in sale, people with knowledge of the matter said. Anchorage invested around $ 500 million in the business over a decade ago. Including MGM’s stake, Anchorage’s flagship fund is up 18% this year, the people added. The fund gained around 8% in 2021 not counting the studio. More stories like this are available at bloomberg.com Join now to stay ahead with the most trusted source of business information. © 2021 Bloomberg LP


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