Redstone Bails out of Midway
Sumner Redstone has often shown a deft hand in his media investments. Gaming just hasn’t been his thing. Through 2005, he acquired about 87% of Chicago area gamer, Midway. The average purchase price was probably close to $8 a share but, over several years of buying, he paid as much as $20 to $24 a share. In the time since, the company has failed to perform or thrive.
In the quarted ended Sept 30, Midway reported a $76 million loss on revenues of just $36.7 million. Friday, the stock finished at just 38cents a share. With other issues lingering, Redstone hit the eject button. Friday, he reached an agreement to divest his stake entirely – at a fire sale price.
According to regulatory filings, Redstone, his family’s theater holding company, National Amusements Inc., and Sumco Inc. (a company he formed in 2005 to shift debt obligations created in acquiring Midway stock), agreed to sell their 87.2 percent interest in Midway to private investor Mark Thomas.
Thomas will pay $0.0012 a share, about $100,000. He will also assume $70 million of debt, $30 million of which is secured ($20m term, $10m revolving) and $40m of which is unsecured. (The complete terms are available in the purchase agreement and participation agreement filed with the SEC here)
There was apparently some urgency to completing the sale in 2008.
A couple weeks ago, Midway received notice that the company’s stock was in danger of being delisted by the New York Stock Exchange after going thirty consecutive days with trading price below $1 a share.
In addition, it’s believed the sale may boost National Amusements position in talks with bankers to restructure some $800m out of $1.6b that comes due later this month.
The Wall Street Journal is citing sources that the transaction could give National Amusements an $800m Tax loss on the year, some of which will be used against earned income in tax calculations.
Already this year, in October, Mr. Redstone was forced to sell more than $200 million in CBS and Viacom to satisfy debt covenants. All reports indicate he doesn’t want to part with more shares of either of those companies, especially Viacom.
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