Viacom promoter Sumner Redstone sells controlling stake in Midway Games to ease debt pressures
01 Dec 2008
With the current global downturn assailing markets around the world, several large companies have resorted to offloading valuable assets in an effort to raise cash and reduce debt. Viacom owner Sumner Redstone became the latest business baron to join this list when he sold his controlling stake in videogame company Midway Games Inc. to a private investor.
Redstone's holding company, National Amusements Inc. has sold its 87 per cent stake in Midway to investor Mark Thomas, a move that represents a significant loss on the media mogul's investment but secures a hefty tax benefit as he negotiates other asset sales. Thomas has agreed to pay about $100,000, or $0.0012 a share, for the Midway stake and will assume $70 million of senior secured and unsecured debt. Thomas has no prior relationship with Midway Games. He has no prior relationship with Midway Games.
The sale of the Midway stake, agreed upon Friday, wasn't conducted as part of a deal with the banks but is likely to ease the pressure on the Redstone family and potentially contribute to a final deal. National Amusements has about $1.6 billion in debt outstanding. Half of that will need to be repaid by year-end.
The sale of the Midway stake marks the end of a tumultuous investment for Mr. Redstone. He poured hundreds of millions of dollars into the company, only to see his investment fizzle as the company failed to create new hit games and its stock collapsed. Redstone's stake had a market value of just $30 million Friday, but he sold it for a huge discount to even that - a condition of finding a buyer quickly and completing a deal this year.
Redstone has already sold $233 million of his holdings in Viacom Inc. and CBS Corp. to help resolve his family's debt issues. He has vowed not to sell any more of his holdings in those two companies. National Amusements' $1.6 billion of debt isn't currently secured by any assets. However, under a new deal, the Redstones are discussing securing their outstanding debt with some of their remaining assets, according to people familiar with the situation.
