A group headed by Sony Corporation of America has agreed to buy Hollywood film studio Metro-Goldwyn-Mayer (MGM) for about $2.85 billion (€2.33 billion) in cash to mine MGM's lucrative library for the booming DVD market.

MGM, the 80-year-old studio that owns the James Bond movies, said that the unit of Japanese electronics giant Sony would be joined by Providence Equity Partners, Texas Pacific Group and DLJ Merchant Banking Partners.

Sony said it had reached a separate agreement with top US cable TV operator Comcast, for Comcast to offer Sony and MGM movies over its video-on-demand systems and on new cable channels that it would form with the Sony group.

Emerging as victor in a drawn- out acquisition battle with Time Warner, Sony will join forces with MGM to create the world's largest film library of about 7,600 titles, comprising some 3,500 movies from Sony and about 4,100 from MGM.

Sony will pay $12 cash per share for MGM, controlled by billionaire Mr Kirk Kerkorian, and assume about $2 billion of debt. With roughly 237.6 million MGM shares outstanding at the end of July, the total value of the deal is about $4.85 billion.

The purchase of MGM is in keeping with chief executive Mr Nobuyuki Idei's vision of creating synergies between Sony's consumer electronics products and music, movies and games.

But investors said it would be some time before the potential merits of the deal become clear.

Sony's shares slid 1.52 per cent to 3,890 yen on Tuesday, underperforming the Nikkei average, which rose 0.38 per cent.

MGM's film library is considered its crown jewel, generating a stream of revenue in the DVD market. Sony could also plumb the MGM library for sequels, and MGM's trademark Leo the Lion is a globally recognised brand.

Including the titles owned by Sony Pictures Entertainment, the Sony group will control about 40 per cent of all movies ever produced by Hollywood, according to some estimates.

The announcement of the deal by MGM came after Time Warner withdrew.