Nat'l Amusements ups ante on auction

More bids expected once lucrative theaters put up for sale

U.S. screens included in a $1 billion-plus batch of National Amusements theaters drew fewer than a half-dozen bids by Thursday, but more were expected by Friday's deadline after lucrative properties initially withheld were tagged for sale.

A separate auction of National's roughly 275 U.K. screens completed its first round of nonbinding offers last week amid a flurry of last-minute bidding. But Citigroup, which is conducting the U.S. and U.K. auctions, quietly has been reviewing additional offers.

Prospective suitors for the National theaters had been encouraged to bid on the entire group of assets tagged for sale in the U.S. and U.K. auctions, though Citigroup made it clear unofficially that more narrowly drawn offers also would be accepted.

"There will be proposals for the whole, just as in the U.K.," a source said Thursday.

After National and Citigroup execs decide that enough offers have been received, bidders will be given access to more detailed financial data on the circuit, and a new round of bidding will follow.

Three points seem clear:

-- It's unlikely that any "strategic buyers" -- other theater circuits -- will place bids for all of the assets in either the U.S. or U.K.

-- Financial entities placing bids on entire blocs of assets always tend to make lowball offers initially.

-- Eventually, Citigroup will help National topper Sumner Redstone decide whether he can best maximize proceeds from the theater sales by accepting rich bids on individual assets from strategic buyers or by unloading all of the assets to single financial buyers in the U.S. and the U.K.

If all the tagged assets are sold, that would leave National operating only about 175 screens located in Latin America and Russia. It's unclear whether Redstone's daughter, National president Shari Redstone, would continue to oversee those operations.

Sumner Redstone is chairman of Massachusetts-based National, parent company of publicly traded Viacom and CBS Corp. Several months ago, National defaulted on various loan covenants when the share prices of Viacom and CBS plunged amid the nation's spreading economic crisis.

Subsequent negotiations with a lenders consortium led by Bank of America resulted in National's tapping Citigroup to solicit bids on a group of theaters representing about two-thirds of 1,500 screens in the U.S. and abroad. Select theaters in New England and New York were withheld from briefing books distributed to some 60 prospective suitors in March, but all of the withheld theaters in the Northeast U.S. now also have been tagged for sale.



In total, National is auctioning off about 1,050 U.S. screens. Proceeds from the theater sales will go toward paying off more than $1 billion in loan payments that will come due during the next year.

In an earnings conference call Thursday, Sumner Redstone cited "substantial preliminary interest" in the National auction. He added that he is "very encouraged" by the number of parties who have expressed interest.

The majority of National's scheduled debt payments won't come due until 2010, so Citigroup should have time to extend its National auction if necessary.

Redstone is attempting to sell his theaters in a tough environment. Although the boxoffice is booming, credit markets remain cranky, so few if any strategic buyers could afford an acquisition of all the assets being auctioned.

Not that exhibitors are unhappy these days, as strong boxoffice and surprisingly healthy concessions revenue are extending the industry's recession-proof reputation.

On Thursday, the nation's No. 1 exhib, Regal Entertainment Group, said its fiscal first-quarter net profit fell 23% to $21.3 million. But Regal's quarterly revenue rose 6% through April 2, to $665.6 million.

The Knoxville, Tenn.-based company said admissions revenue rose more than 6% to $459.5 million. Concession sales were up almost 8% to $179.4 million.

Industrywide, exhibition posted a 10% increase in first-quarter boxoffice, at $2.43 billion. Admissions were up 6%, at almost 331 million tickets sold.

The National Association of Theatre Owners said Thursday that first-quarter ticket prices averaged $7.35, or almost 4% higher than a year earlier.

Georg Szalai in New York contributed to this report.
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