Sony Corporation is in talks to buy the Metro-Goldwyn-Meyer film business, one of the best-known names in Hollywood, in a deal worth $5bn (£2.7bn).
MGM, the studio behind the James Bond series, is the only Hollywood business of any significant scale left that is not part of a larger media conglomerate.
The studio, with its well-known roaring lion trademark, has been in operation since 1924 and has a library of classics including Ben-Hur, Gone With the Wind, the Wizard of Oz, Dr Zhivago and Rocky. The back catalogue of more than 4,000 films is regarded as the most valuable part of the business.
Sony has teamed up with two private equity firms - Texas Pacific Group and Providence Equity Partners - to make the bid. According to one report, the three will split a $1.5bn cash payment and borrow the rest to finance the deal.
Shares in MGM last night gained almost 12% to reach $19.75, their highest in two years. The offer is reported to be valued at about $21 a share.
One person familiar with the talks however warned that obstacles remain in the discussions and that any suggestion they were advanced should be taken with caution.
The studio is more than 70% owned by Kirk Kerkorian, the billionaire investor. Mr Kerkorian has been in possession of the studio three times since the 1960s, most recently buying it from investment bank Credit Lyonnais for $1.3bn.
The rapid growth of the market for home video and DVDs as well as new technologies such as pay-per-view has made back catalogues even more valuable. MGM's DVD sales have increased from $388m in 2001 to $916m last year.
Sony held preliminary talks with MGM two years ago but the discussions failed to progress. Mr Kerkorian has tried to sell the business on a number of occasions and hired Goldman Sachs to investigate options several years ago.
Most big media groups have had their names tied to the company as possible bidders. The price, however, has usually proved the biggest stumbling block. Sony and MGM declined to comment.
This month MGM announced plans for a one-time dividend of $8 a share. It is unclear whether that would still be paid if a deal was agreed.
MGM's current slate of films includes the comedy Barbershop 2; a sequel to the children's spy movie Agent Cody Banks and art house hit Pieces of April.
One of the studio's most notable successes in its recent history was the reinvention of the once flagging James Bond series. It is also planning a new Pink Panther film, featuring Steve Martin.
The studio was originally formed through the merger of Metro Pictures, Goldwyn Pictures and Louis B Mayer Productions. Today it also includes United Artists Films, Orion and television production. Mr Kerkorian also controls Las Vegas casino and ho tel operator MGM Mirage, currently locked in a bid battle for UK gaming and race track operator Wembley.
If the sale is agreed, MGM would join Sony Pictures, the studio behind current blockbusters including the comic book adaptations Spider-Man 2 and Hellboy and the Johnny Depp thriller Secret Window.
MGM has made no secret of its desire to become part of a bigger group and last year bid $11.5bn for the US assets of Vivendi Universal. It eventually lost out to General Electric's NBC.
· The merger of NBC and Universal cleared its final hurdle last night after media mogul Barry Diller agreed to let the deal go through.
Mr Diller had certain complex ownership rights in Universal that were complicating the sale.
