Bloomberg (Bloomberg) -- Hedge funds often measure their investments in minutes, not decades; but for Anchorage Capital Group, its long-held stake in Metro-Goldwyn-Mayer Studios Inc. is proving that patience can also be profitable.The New York-based money manager stands to make roughly $2 billion on its investment in the film and TV producer, one that began almost 11 years ago with MGM in bankruptcy court. Amazon.com Inc. agreed to buy the company for $8.45 billion Wednesday, a price that includes just under $2 billion in debt.The deal is in many ways a vindication for Kevin Ulrich, the former Goldman Sachs Group Inc. trader who co-founded Anchorage in 2003 and was part of a group of distressed debt investors that took control of MGM as it went through the restructuring process. In recent years the stake looked to be an albatross for the fund, one that came with significant drama in its own right.Ulrich brought in and later fired a high-profile chief executive officer, resisted efforts by activist investor Carl Icahn to take control, and held out for a bigger payday after years of considering various exit strategies. By selling now, as demand for media content from entertainment and technology companies alike is booming, he’s proving his long-held faith in the investment was justified.“There was a lot of maneuvering, a lot of financial engineering,” said Steven Azarbad, chief investment officer at New York’s Maglan Capital, an MGM investor who sold his shares four years ago. “But they’ve done great.”A representative for Anchorage declined to comment.When Ulrich first invested in MGM, he was new to Hollywood. He helped pick Gary Barber, a South African-born producer of films such as “Ace Ventura: Pet Detective” as chief executive officer of the storied but debt-laden studio. Barber brought to the table a shrewd business sense, and connections into a world Ulrich long admired from afar.Barber shepherded MGM’s development of “The Hobbit” franchise, a co-production with Warner Bros., that became a global smash hit. He helmed the release of the James Bond film, “Skyfall,” which generated over $1 billion at the box office, and he revived the studio’s work in television. Barber also brokered a deal to bring on TV super producer Mark Burnett, which gave MGM access to reality show hits like “Survivor” and “The Apprentice,” but would ultimately become personally troublesome.In 2012 the company bought back Icahn’s stock for $590 million. It also filed paperwork for a possible public offering of shares, and considered other options, such as a sale.As Barber boosted MGM’s film and TV pipeline, Ulrich was increasingly entranced by the allure of Hollywood. He became a regular at movie premieres in Los Angeles and New York, and frequented industry parties in the Hamptons and elsewhere. He became active in creative decisions after becoming chair of MGM’s board -- somewhat unusual for a non-executive lacking Hollywood experience -- even getting involved with business granularities like casting.Growing RiftBut over the following years a rift began to open up between Barber and Ulrich. When it was time to renew Barber’s contract in 2017, Ulrich conducted an extensive search for a new CEO. When it ended, he ultimately chose to sign Barber to a new five-year deal. Yet around the same time, the pair split on whether to sell the company, with Ulrich wanting to hang on to the studio and Barber saying it was time to find a buyer.The company would hold buyout talks with Apple Inc. as well as Chinese investors that would ultimately prove fruitless.Only months after renewing Barber’s deal, Ulrich fired him. The shock departure meant the company had to pay Barber for five years of salary and buy out his equity, a package totaling $260 million. In the three years since Barber left, Ulrich hasn’t replaced him, instead operating an “office of the chief executive officer,” comprised of various people that each have their personal vision for MGM.Barber declined to comment via his spokesperson.Bounce BackAfter the initial period of success following the restructuring, the gains became harder to come by, as they did in Anchorage’s overall credit-focused business. Two senior managers left the firm in January 2020, and another in November. Anchorage’s flagship strategy, with about $8.5 billion under management, returned just 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 film in theaters in 2020. Its biggest potential hit, the latest Bond film, “No Time to Die,” was pushed from last year to this October as a result of the pandemic.Yet the value of MGM’s library rose as everyone from media companies to technology giants have sought to build video streaming platforms that can compete with industry leader Netflix Inc. Earnings jumped 48% last year, to about $307 million, even as sales declined.Anchorage holds a roughly 30% stake in MGM, worth about $2.5 billion in the sale, said people with knowledge of the matter. Anchorage invested around $500 million in the company more than a decade ago. Including the MGM stake, Anchorage’s flagship fund is up 18% this year, the people added. The fund has gained about 8% in 2021 not counting the studio.More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.<doc-sep>Associated Press SHENZHEN, China – Chinese tech giant Huawei is challenging a U.S. law that labels the company a security risk and would limit its access to the American market for telecom equipment. Huawei Technologies Ltd.’s lawsuit, announced Thursday, asks a federal court to reject as unconstitutional a portion of this year’s U.S. military appropriations act that bars the government and its contractors from using Huawei equipment. It comes as the biggest global maker of network equipment fights a U.S. campaign to persuade allies to shun Huawei . That effort threatens to block access to major markets as phone carriers prepare to invest billions of dollars in next-generation, 5G networks. The complaint, filed in Plano, Texas, the headquarters of Huawei’s U.S. operations, cites the framers of the U.S. Constitution, including Alexander Hamilton and James Madison, in arguing that the law in question violates the constitutional separation of powers, denies due process and amounts to a “Bill of Attainder” that singles out a specific entity for adverse treatment. It says the law causes the company “concrete and particularized injury, and imminent future injury” and subjects it to a “burden that is severe, permanent and inescapable” that amounts to a corporate “death penalty.” Huawei, China’s first global tech brand, is at the center of U.S.-Chinese tensions over technology competition and cyber-spying. The company has spent years trying to put to rest accusations it facilitates Chinese spying or is controlled by the ruling Communist Party. Increasingly, both sides appear to be resorting to courts to press their cases. “We are compelled to take this legal action as a proper and last resort,” the company’s rotating chairman, Guo Ping, said at a news conference. Guo said the ban would limit competition, slowing the rollout of fifth-generation communications and raising consumer prices. Huawei has pleaded not guilty to U.S. trade-theft charges after a federal court in Seattle unsealed a 10-count indictment in January against two of its units, Huawei Device Co. and Huawei Device USA. The charges include conspiracy to steal trade secrets, attempted theft of trade secrets, wire fraud and obstruction of justice. The company’s chief financial officer, Meng Wanzhou, is fighting extradition to the U.S. after she was arrested in Vancouver, Canada on Dec. 1. U.S. prosecutors have filed charges accusing Meng, who is the daughter of Huawei’s founder, of lying to banks about dealings with Iran. Huawei denies any wrongdoing. At a routine briefing Thursday, a Chinese foreign ministry spokesman noted that the Chinese government has also objected to the law. “We believe that it is perfectly proper and fully understandable for companies to defend their legitimate rights and interests through legal means,” Lu Kang said. He said he had no information about whether China would join Huawei in the lawsuit. Huawei has about 40 percent of the global market for network gear. Its U.S. sales evaporated after a congressional panel in 2012 cited the company and a Chinese competitor, ZTE Corp ., as security risks and told phone carriers to avoid dealing with them. U.S. authorities “have hacked our servers and stolen our emails” but have presented no evidence to support their security claims, Guo said. He complained Washington was “sparing no effort to smear” the company. Huawei says the new law would shrink its potential U.S. market further by prohibiting the government from buying the Chinese vendor’s technology and from buying goods or services from or giving grants or loans to companies or other third parties that do. The United States accounts for 20 to 25 percent of the global market for computer and telecom technology. Huawei says the U.S. law it is protesting improperly has Congress play the role of a court. The ban is “based on numerous false, unproven and untested propositions,” said Song Liuping, the company’s chief legal officer, at the news conference. “Huawei has an excellent security record and program. No contrary evidence has been offered.” The Chinese government says Washington fabricates or exaggerates security concerns to block competition. Huawei, based in Shenzhen, near Hong Kong, is a leading developer of 5G along with rivals Nokia Corp. of Finland and Sweden’s LM Ericsson. Industry analysts say excluding the Chinese vendor from markets for 5G equipment would reduce competition and might lead to higher prices. Founded in 1987 by a former military engineer, Huawei overtook Ericsson in 2017 as the biggest global supplier of network gear. It says it supplies 45 of the world’s top 50 phone companies and has contracts with 30 carriers to test 5G wireless technology. European governments are balking at U.S. pressure to ban Huawei. The company has announced contracts with customers including the United Arab Emirates in the Middle East for network technology. China’s government arrested two Canadians, a former diplomat and a businessman, on Dec. 10 in what was widely seen as an attempt to pressure Canada to release Meng, the company’s CFO. On Monday, Beijing accused the two men of acting together to steal state secrets . That followed the Canadian government’s announcement Friday that the extradition proceeding for Meng would be allowed to continue. Huawei executives say American security warnings have yet to affect sales outside the United States . The company’s 2018 revenue forecast is $100 billion and its founder, Ren Zhengfei, said last month this year’s target is $125 billion. Some European officials and others cite a Chinese security law requiring companies to cooperate with intelligence agencies they say might oblige Huawei and other tech companies to install “backdoors” in equipment to allow eavesdropping. Huawei denies altering its equipment to facilitate spying. It has set up testing centers in Britain, Canada and continental Europe to allow governments to examine its technology. “Huawei has not and will never implant ‘backdoors,’ “ said Guo, the chairman.<doc-sep>China’s foreign minister has said Beijing will “take all necessary measures” to defend the rights and interests of Chinese companies such as Huawei, which is locked in an escalating legal dispute with the US. Beijing’s top diplomat, Wang Yi, said in response to a question about the company suing the US: “It is not difficult to see that the recent actions against specific Chinese enterprises and individuals are not just judicial cases, but deliberate political suppression. “We have and will continue to take all necessary measures to resolutely defend the legitimate rights and interests of Chinese enterprises and citizens,” he said, adding that Beijing supported “related companies” in defending themselves and refusing to be “silent lambs”. On Thursday, Huawei filed a lawsuit in Texas, where its US headquarters are based, alleging that a US government ban on its products and services was unconstitutional. Huawei’s chief financial officer, Meng Wanzhou, also faces charges in the US over alleged fraud and violation of US sanctions on Iran. Huawei’s lawsuit marks its most aggressive move yet in a campaign to rehabilitate its global image after the US lobbied allies to restrict the company from supplying equipment for 5G mobile technology networks. It is the world’s largest telecommunications equipment provider and a global leader in 5G and smartphones. Founded by a former military engineer, Ren Zhengfei, it has come under increasing scrutiny over possible connections with the Chinese government. The company, in a global public relations push over the last few months, has insisted that it has never given and would never give information to the Chinese government. However under a national intelligence law the company would be required to cooperate with Chinese authorities if asked. “Huawei is not owned, controlled, or influenced by the Chinese government. Moreover, Huawei has an excellent security record and programme. No contrary evidence has been offered,” said Song Liuping, Huawei’s chief legal officer. The legal wrangling comes as the US and China remain locked in negotiations to end a bruising trade war kicked off by sanctions imposed by the US last July. US president Donald Trump has said he is optimistic that a deal will be reached soon. On Wednesday, Trump said talks were “moving along well”. China has agreed to buy more US goods and is set to unveil a foreign investment law that will bar local governments for forcing foreign firms to transfer technology to local companies, one of Washington’s key grievances. But sticking points remain and Huawei may become a bargaining chip in the ongoing talks. When asked last month if dropping charges against Huawei could be part of a trade deal, Trump said: “We’ll be making that decision.” Last year, the US lifted a ban on Chinese tech firm ZTE, which Trump described as part of a larger trade deal the US was negotiating with China and his “personal relationship with president Xi.” The lawsuit has a small chance of winning in court, experts say. But its chief purpose may be forcing the US to make its case against Huawei publicly. “The payoff is mostly public relations. It shows Huawei will use the US legal system and allow it to show how it thinks it has been unfairly treated,” said Julian Ku, who teaches international law at Hofstra University.<doc-sep>
SHENZHEN, China — Chinese tech giant Huawei is challenging a U.S. law that would limit its American sales of telecom equipment on security grounds as the company steps up efforts to preserve its access to global markets for next-generation communications. Huawei Technologies Ltd.’s lawsuit, announced Thursday, asks a federal court to reject as unconstitutional a portion of this year’s U.S. military appropriations act that bars the government and its contractors from using Huawei equipment. It comes as the biggest global maker of network equipment fights a U.S. campaign to persuade allies to shun Huawei. That threatens to block access to major markets as phone carriers prepare to invest billions of dollars in fifth-generation, or 5G, networks. The complaint filed in Plano, Texas, the headquarters of Huawei’s U.S. operations, says the law is an unconstitutional “bill of attainder,” or a measure that singles out a specific entity for punishment. It says that denies the company due process and amounts to a “death penalty.” The American Embassy in Beijing said it had no comment on pending litigation. READ MORE: China accuses U.S. of trying to block its tech development Huawei, China’s first global tech brand, is at the center of U.S.-Chinese tensions over technology competition and cyberspying. The company has spent years trying to put to rest accusations it facilitates Chinese spying or is controlled by the ruling Communist Party. “We are compelled to take this legal action as a proper and last resort,” the company’s rotating chairman, Guo Ping, said at a news conference. Guo said the ban would limit competition, slowing the rollout of fifth-generation communications and raising consumer prices. Huawei has pleaded not guilty to U.S. trade-theft charges unsealed by a federal court in Seattle in January. The company’s chief financial officer, Meng Wanzhou, was arrested Dec. 1 in Canada on U.S. charges of lying to banks about dealings with Iran. She is fighting extradition to the United States. Huawei denies wrongdoing. A foreign ministry spokesman said the Chinese government also objects to the law but he had no information on whether it would join Huawei’s lawsuit. “We believe that it is perfectly proper and fully understandable for companies to defend their legitimate rights and interests through legal means,” Lu Kang said. Huawei has about 40 percent of the global market for network gear. Its U.S. sales evaporated after a congressional panel in 2012 cited the company and a Chinese competitor, ZTE Corp., as security risks and told phone carriers to avoid dealing with them. Huawei says the new law would shrink its potential U.S. market further by prohibiting the government from buying the Chinese vendor’s technology and from buying goods or services from or giving grants or loans to companies or other third parties that do. The United States accounts for 20 to 25 percent of the global market for computer and telecom technology. The ban is “based on numerous false, unproven and untested propositions,” the company’s chief legal officer, Song Liuping, said at the news conference. “Huawei has an excellent security record and program. No contrary evidence has been offered.” Australia, Japan, Taiwan and some other governments also have imposed curbs on use of Huawei technology. Guo complained Washington was “sparing no effort to smear” the company but has released no evidence. Huawei wants to negotiate with Washington to resolve its security concerns but the law blocks President Donald Trump from restoring market access, Guo said. He noted Trump has said he opposes using “artificial security reasons” to exclude Huawei. Lifting the ban “will give the U.S. government the flexibility it needs to work with Huawei and solve real security issues,” Guo said. Huawei, based in Shenzhen, near Hong Kong, is a leading developer of 5G, along with rivals Nokia Corp. of Finland and Sweden’s LM Ericsson. Industry analysts say excluding the Chinese vendor from markets for 5G equipment would reduce competition and might lead to higher prices. Founded in 1987 by a former military engineer, Huawei overtook Ericsson in 2017 as the biggest global supplier of network gear. It says it supplies 45 of the world’s top 50 phone companies and has contracts with 30 carriers to test 5G wireless technology. Chinese authorities and some industry analysts say Washington might be exaggerating security concerns to limit competition with Western vendors. European governments are balking at U.S. pressure to ban Huawei. The company has announced contracts with customers including the United Arab Emirates in the Middle East for network technology.