First Bids In for National Amusements

TORONTO (Reuters) – Sumner Redstone’s National Amusements has received a first round of bids for its U.S. and U.K. theater chains, with bidders offering enough to help the company pay off its debt obligations due in 2009, sources familiar with the matter said.

At least 10 parties have bid in each auction, the sources said, adding that the U.S. auction had been expanded to include most of the theaters in New England, which were previously excluded from the sale.

The auction was expanded because many bidders expressed interest in the New England properties, the sources said.

The people requested anonymity because details of the auction have not been made public.

Some parties have bid for all the U.S. properties up for sale while others have pitched for particular theaters, the sources said. Bidders for the U.S. properties are mostly U.S.-based strategic rivals and private equity firms, the sources said.

National Amusements, Redstone’s holding company for his controlling stakes in CBS Corp (CBS.N) and Viacom Inc (VIAb.N), declined to comment.

The company is selling 68 theaters in the United States and 21 theaters in the United Kingdom in two separate auctions.

National Amusements, which operates 1,500 screens in the United States, United Kingdom, Latin America and Russia, is still excluding a few theaters in the U.S. Northeast and all of the properties in Russia and Latin America from the sale, the sources said.


The company reached an agreement with lenders in February to restructure $1.6 billion in debt, ending months of uncertainty after it violated debt covenants in October.

The agreement extended the maturity of the debt to Dec. 31, 2010, with certain repayments due in late 2009. The debt totals $1.46 billion after a repayment at closing, the company said earlier this year.

The sources said the bidders had offered prices high enough for National Amusements to pay down the debt due this year, but declined to provide specifics on the bid amounts.

Another person familiar with the debt discussions said the company would have to pay about $500 million or more this year, with the majority of the debt coming due next year.

Even though the deal eased some of the pressure to sell assets immediately to repay debt, it does require that Redstone’s company repay everything it owes by the end of 2010, putting some pressure on the company to sell assets by then.

Redstone was forced to sell about $230 million in CBS and Viacom shares to help meet debt obligations last fall, and has tried to assure nervous investors he would not sell any more shares of either media company.

The theaters had previously received interest from companies including Regal Entertainment Group (RGC.N), Cinemark Holdings Inc (CNK.N) and AMC Entertainment Inc, sources had said in March.

Regal Chief Executive Michael Campbell said in April the company was reviewing the theater assets but added that it was a tough environment for acquisitions.


Placing a value on National Amusements theaters could be complicated because unlike most chains, the company owns much of the underlying real estate. But the slumping real estate market could also hurt valuations for the chain.

Some media reports have said that Redstone considers the value of the chain to be about $1 billion, including the property on which the theaters were built.

Analysts have valued the entire theater chain at about $500 million to $700 million, but sources close to the auction said that range was too low.

Movie theater assets typically sell at multiples of five to six times cash flow, but investment bankers expect the National Amusements theaters to sell at three to four times, mainly due to tight credit conditions and the company’s need to sell assets.

(Reporting Jui Chakravorty; Editing Bernard Orr, Richard Chang)