Seeking to raise funds to shore up National Amusements Inc., via which he controls both CBS Corp. and Viacom, Sumner Redstone has sold his controlling stake in Midway Games to investor Mark Thomas for a fraction of what he paid for it. But will that be enough for Redstone to avoid selling any more of his CBS or Viacom holdings?
Despite the opposition of his daughter, Shari Redstone, who was and is President of National Amusements Inc. (NAI) and runs its movie theaters, Sumner Redstone had NAI buy up nearly 22.7 million shares of Midway. But he owned even more. He bought 12.4 million shares directly and 45.2 million through his personal investment vehicle, Sumco. All in all, Redstone, NAI and Sumco amassed 80,339,266 shares of Midway for hundreds of millions of dollars. No doubt Redstone’s accountants have the exact figure, but you would need days of research to go through the SEC filings to tally the purchases, since they were almost all in small blocks on the open market.
Now, though, with NAI pressed for cash as it negotiates with its lenders over $1.6 billion of debt – about half of which is coming due this month, Redstone has dumped the Midway stake at a bargain basement price. Under the unusual deal cut with Mark Thomas, a private investor with no previous involvement in Midway, Thomas will pay about $96,400 for the 80-million-plus shares of Midway, or 12-one-hundredths of a cent each. But, more importantly, he will assume liability for $70 million in loans that NAI had made to Midway. That should give additional security to NAI’s banks for at least a small portion of the debt that NAI is trying to refinance.
The Wall Street Journal reports that the various Redstone entities are also in line to write-off about $800 million in losses when they file their 2008 taxes as a result of the Midway stock sales.
RBR/TVBR observation: Just what was Sumner Redstone thinking when he bought up share after share of Midway Games? We began reporting on his purchases back in 2004 as he approached the 50% point and then kept buying and buying until he owned 87% of the company. For years it seemed that Redstone accounted for almost all of the trading volume in the stock as he bought blocks of a few hundred or a few thousand at a time. But the stock price cratered as Midway failed to produce new mega-hits – and Sumner Redstone was no longer buying to keep the stock price propped up. Whatever he thought the company was capable of doing, it hasn’t done yet. Now we’ll never know what made Sumner Redstone so confident about the future of Midway Games. And if there is a big payoff ahead, it will go to Mark Thomas, not Sumner Redstone.