Redstone sells Midway stake for $100,000
PARIS - Sumner Redstone, the owner of CBS Corp. and Viacom Inc., sold his 87 percent stake in video game maker Midway Games Inc. for $100,000 to help restructure debts that threaten his family business.
The sale to private investor Mark Thomas will provide tax benefits as Redstone negotiates new lending terms for an $800 million loan to his Dedham, Mass.-based National Amusements Inc. holding company, a person with knowledge of the matter said. As part of the deal, Thomas acquired from National Amusements the right to collect on $70 million in debt owed by Midway, according to a regulatory filing yesterday.
Tax benefits will probably help Redstone refinance the National Amusements debt coming due this month and avoid selling more shares of Viacom and CBS, said Creditsights Inc. analyst Jake Newman. Redstone, 85, sold $233 million in nonvoting shares of CBS and Viacom in October to meet debt covenants and swore off further stock sales. He may sell the National Amusements theater chain, a person with knowledge of the discussions said last week.
"The biggest challenge is negotiating something that both sides could live with," Newman said in reference to talks between Redstone and his bankers. "The banks also have an incentive to work with Sumner Redstone because he controls two very large organizations that have a lot of banking needs."
With the sale of Midway, National Amusements will realize a 2008 tax loss of more than $800 million, said the person familiar with the matter, who asked not to be named because talks are private. The company can use a portion of the loss to offset income earned this year and receive a tax refund, the person said. National Amusements can carry forward any unused balance of the loss for five years to offset future taxable income.
Midway closed Nov. 28 at 38 cents a share, valuing Redstone's stake at $30.5 million. Thomas will pay 0.12 cent a share for the stock, according to a regulatory filing yesterday. Midway fell 5 cents to 33 cents in New York Stock Exchange composite trading.
The Wall Street Journal reported the transaction earlier yesterday.
National Amusements spokeswoman Brandy Bergman said the sale would be "financially beneficial" for the company. The value of National Amusements' assets "well exceeds" its debt, Redstone said last month.
The NYSE said Nov. 28 it may delist Midway because the Chicago-based maker of Mortal Kombat hasn't maintained an average market value of at least $75 million over 30 days. Midway shares have declined 86 percent this year and the company has lost money every quarter for the past four years.
Thomas plans to be a passive investor in Midway and has no intention to change its management or its board, said Peter Kolevzon, Thomas's attorney. 