MGM studios to be bought by Sony

James Bond's mix of action and humour has made it a global hit

Hollywood's last major independent studio, Metro-Goldwyn-Mayer, says it has agreed in principle to be bought by Japan's Sony Corporation.

US media group Time Warner earlier withdrew its bid for MGM saying it could not agree on a price.

The Sony offer is reported to be $5bn (£2.78bn), over half in cash and the remainder the assumption of MGM debts.

The deal will give Sony access to MGM's film library, a key source of cash as more movies are released on DVD.

Sony shares fell 1.5% to 3,890 yen in Tokyo on Tuesday as traders digested the news.

MGM already has sold off many of its most famous films, such as the Wizard of Oz and Gone with the Wind.

It does, however, still owns the rights to most of the films it produced since the 1960s, including the James Bond and Pink Panther franchises.

Sony will reportedly pay $12 per MGM share, a total of $2.93bn, and take on about $2bn of MGM debt.

"MGM management is expected to recommend the proposed merger to its Board by September 27, 2004," said a statement issued by the studio late on Monday.

Golden age

MGM was founded in the golden age of Hollywood in 1924 after a merger between Metro Pictures Corporation, Goldwyn Pictures, and Louis B Mayer Productions.

The iconic studio has been in talks with bidders for several months, and a decision on the sale is now expected to come within days.

Time Warner's offer was said to be made up of cash and shares.

The Japanese electronic giant's bid is backed by two private equity firms, Texas Pacific Group and Providence Equity Partners.

Sony also offered a security deposit of $150m.