Carlton back in MGM bidding

Bidding for the MGM cinema chain was thrown into confusion over the weekend by a surprise late offer from Michael Green's Carlton Communications.

SG Warburg, the merchant bank handling the sale for MGM's owner, Credit Lyonnais, was due to announce the winning bid this week but that timetable is now likely to slip.

Rank Organisation was believed to be urgently reviewing its offer for MGM, which is the UK's largest cinema chain with 26 per cent of the market. Other bidders have included Richard Branson's Virgin group and Time Warner, the US entertainment group, but they are now almost certainly out of the running.

Rank was thought to have offered around pounds 200m for MGM, but has now been topped by Carlton's bid.

Carlton pulled out of the race some weeks ago, but was persuaded to return to the arena when Rank's bid hit monopolies worries. Rank has 20 per cent of the British cinema market through its Odeon chain, and would probably be forced by the Office of Fair Trading to divest some of its interests if the takeover succeeded.

MGM owns 120 traditional cinemas - those with one or two screens - and 18 multiplexes in the UK and Irish Republic. Rank has 300 screens, spread across 73 sites.

With MGM, Rank could boost its share of the profitable multiplex sites, and sell the less profitable smaller cinema sites. There have been suggestions Rank had lined up a partner to buy the cinemas it did not want but the company declined to comment yesterday.

Carlton has no cinema interests, so would not face regulatory problems. It would be cautiously welcomed as a buyer by many in the industry who are worried by the domination of a few giant corporations like Rank and Time Warner. Film-makers complain that the concentration of the industry has made it harder for them to arrange for their films to be widely shown.

Last year a report by the Monopolies and Mergers Commission into the film industry found against all six leading cinema chains, saying they were engaged in restrictive practices with the big film distributors.

Nigel Griffiths, the Labour Party's spokesman on corporate affairs, welcomed another bid for MGM and suggested that the National Heritage Select Committee should question bidders.

Credit Lyonnais acquired MGM cinemas after it supported a failed attempt to take over the whole MGM group. Separate negotiations for the sale of MGM's Dutch cinemas to an un-named buyer are thought to have been concluded in the past few days.