AP sources: Debt-laden Redstone eyes theater sales
Ryan NakashimaLaden with debt, billionaire Sumner Redstone's theater chain company, National Amusements Inc., is looking to gain freedom to maneuver by selling around 600 movie screens in the U.S., people familiar with the situation said Thursday.
Redstone and his daughter, Shari, who is National Amusements' president, have been personally calling potential buyers in hopes of raising $230 million to $280 million from the U.S. movie screens, plus an unspecified sum for overseas theaters, a person with detailed knowledge of the offer told The Associated Press. This person spoke on condition of anonymity because the discussions are supposed to be confidential.
The theater sales are part of negotiations to restructure National Amusements' $1.6 billion in debt, half of which is due Dec. 19. Details are to be made clear to prospective buyers early next year.
The Redstones declined to comment.
The sale of part of the private company, which also holds Redstone's controlling interest in Viacom Inc. and CBS Corp., is the latest move in an attempt to handle a debt crisis. Given that the sales would come, at the earliest, weeks after $800 million in debt matures, lenders may have eased up pressure on the company to cut a deal by next week.
Last week, the Dedham, Mass.-based company sold its 87 percent stake in Midway Games Inc. for just $100,000, generating a tax loss estimated to be as much as $600 million, to help offset capital gains on later asset sales or generate a tax rebate.
The company also sold $233 million in nonvoting shares of CBS and Viacom in October to avoid violating the terms of its loans. Sumner Redstone has said he would not sell any further CBS or Viacom shares.
"Sumner has raised a fair amount of cash already," said BMO Capital Markets analyst Jeffrey Logsdon. "The environment may have gotten a little better, making the banks breathe a little easier."
The sale National Amusements is proposing would include 45 multiplex theaters in the United States, with 593 screens. National Amusements would keep 28 theaters, with 368 screens, that are located in Massachusetts and New York.
National Amusements' theaters operate under other brand names, including Showcase, The Bridge and Multiplex Cinemas.
The U.S. theaters for sale make around $40 million a year in earnings before interest, taxes, depreciation and amortization, putting the price at about six to seven times those earnings, one of the people close to the situation said.
The company is also seeking to sell 28 theaters in Britain, the other person said. This person also asked not to be identified because the negotiations are confidential.
The sale comes at a difficult time to buy a business that depends on consumer discretionary spending, and the tight credit market could make it expensive for potential buyers to raise the necessary financing.
Some potential buyers, like publicly traded theater owners Regal Entertainment Group and Cinemark Holdings Inc., are in the midst of converting thousands of screens to digital and 3-D-capable projection systems, while attempting to conserve cash and pay dividends to shareholders, said Piper Jaffray analyst James Marsh.
"It's a great collection of assets. They're valuable. I just don't see anyone stepping in for a close-to-$300-million transaction in this environment," Marsh said. "I wouldn't be surprised to see a private company backed by private equity step up and buy some of these."
A Regal spokesman declined to comment. Representatives for Cinemark and another possible bidder, privately held AMC Entertainment Inc., did not return messages.