National Amusements theater auction sparks interest

NEW YORK (Reuters) - Sumner Redstone’s National Amusements has received interest from strategic rivals and private equity firms for its U.S. and U.K. theater chains, two sources with knowledge of the auction said.

Sumner Redstone, executive chairman of Viacom Inc., participates in the Business of Sports panel at the 2008 Milken Institute Global Conference in Beverly Hills, California April 30, 2008. REUTERS/Phil McCarten

Sales books started going out in early March to nearly 60 parties for the U.S. theaters and to about 20 for the U.K. screens, the sources said. They spoke on condition of anonymity because the details of the sale have not been made public.

Two separate auctions, likely to help National Amusements pay about half its looming debt obligations, include 54 theaters in the United States and 21 screens in the United Kingdom.

A first round of bids is due in three to four weeks, the sources said.

The assets have received interest from companies including Regal Entertainment Group, Cinemark Holdings Inc and AMC Entertainment Inc, and also from private equity firms, the sources said.

National Amusements, Redstone’s holding company for his controlling stakes in CBS Corp and Viacom Inc, declined comment, as did AMC. Regal and Cinemark were not immediately reachable for comment.

Participants will be allowed to bid for part or all of the assets on sale, the sources said. In a typical auction, not all the parties who receive books offer bids.

National Amusements, which operates 1,500 screens in the United States, United Kingdom, Latin America and Russia, is excluding 17 theaters in the U.S. Northeast and all of the screens in Russia from the sale, the sources said.

The company has also received some interest for its theaters in Latin America, for which it has not yet sent out sales books, they added.

If the company does decide to sell those theaters, it would only reach out to interested parties and would not hold a wide auction, one of the sources said, adding that Redstone would like to sell only the minimum amount of assets needed to repay the company’s debt.

National Amusements reached an agreement with lenders in February to restructure $1.6 billion in debt, extending the maturity of the debt to December 31, 2010, with certain repayments due in late 2009.

The agreement ended months of uncertainty after the company violated debt covenants in October.

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.

CBS shares rose 7.3 percent to $4.71 in Thursday trade on the New York Stock Exchange. Viacom shares were up 1 percent at $18.30.


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.

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.

Investment bankers do not expect any single bidder to buy all the U.S. assets on sale. They expect individual buyers to make regional purchases.

Additional reporting by Gina Keating in Los Angeles; Editing by Andre Grenon and Matthew Lewis