Sumner Redstone offers to sell cinema chain to head off banking trouble
Wednesday 26 November 2008
Sumner Redstone, the octogenarian media mogul, has offered to sell the cinema chain that first made him a billionaire, in a desperate bid to hang on to the rest of his television and film empire.
With a 19 December deadline looming to refinance $800m (£520m) of debt taken out by his holding company, National Amusements, Mr Sumner has offered a partial break-up as a solution.
But with the mogul having been forced into negotiations with his bankers since coming up against debt covenants in the autumn, few observers are willing yet to bet that Mr Sumner will re-emerge still in control of his beloved Viacom and CBS. Viacom owns Paramount Studios, the Hollywood blockbuster factory, and television channels such as MTV and VH1. CBS, meanwhile, is one of the three big television networks in the US, and also owns the publisher Simon & Schuster.
Collapsing advertising sales at the broadcasting companies led to a share price plunge at CBS and Viacom, which in turn triggered Mr Redstone's difficulties last month. When National Amusements was forced to sell $233m in CBS and Viacom shares to satisfy its bankers, the trouble became the talk of the industry. According to people familiar with Mr Redstone's latest proposals, he has offered to sell the 1,300-screen cinema chain at the heart of National Amusements, plus some smaller assets, so that he can hang on to the controlling stakes in Viacom and CBS, but there is no agreement yet with his bankers. Discussions centre on fixing a valuation for the various assets, something which is problematic given the volatility in the share prices and the obscure outlook for consumer spending, which could affect cinema-going next year.
National Amusements began life as the Northeast Theatre Corporation in 1936, set up in Massachusetts by Mr Redstone's father, Michael. The chain is run by Sumner Redstone's daughter Shari, with whom he has had a sometimes fractious relationship. It was only when he was in his fifties that Mr Redstone expanded the company into film and television. The string of acquisitions made him a powerful media owner, and one of the richest men in the US. His fortune was estimated earlier this year by Fortune magazine at $5.1bn, but observers believe much of that wealth has evaporated.
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