Nat'l Amusements fails to attract bidders

Potential suitors may be waiting to cherry-pick assets

Citigroup has attracted little bidding interest for National Amusements' theaters since distributing briefing books this month, partly because prospective suitors have been prevented from cherry-picking assets from the 1,000-plus screens up for sale.

Regal Cinemas, Cinemark and others might be quick to bid on a select number of the theaters, which are spread nationwide with a key concentration of screens in the Northeast. But for now, the parties appear to be waiting for one another to blink regarding rules of engagement in the auction.

National has held back from the sale of several theaters in New York and New England. The exhibitor also took Russian screens off the table before distributing a second auction book on international assets in the U.K. and Latin America that number among its roughly 1,500 worldwide movie screens.

The screen sell-off is traceable to financial woes of Viacom topper Sumner Redstone, a majority owner in the circuit. National is the privately held parent to publicly traded Viacom and CBS Corp.

Though well-regarded in the exhibition community, National has chosen the worst of times to put its assets on the auction block. Wall Street sources suggest anybody bidding on the National screens likely would value the assets significantly below similar valuations of the recent past, when theaters have sold for a "multiple" of about seven times cash flow.

"There are no buyers for all of the theaters being sold," one highly placed exhibition exec said Tuesday.

Some say it's only a matter of time before National allows more select bidding on its circuit. That was the route taken by Muvico Entertainment, which last week sold three Florida theaters and one in Maryland to Cinemark.

Terms weren't disclosed, but execs said that proceeds would allow Muvico to retire in full a nagging debt load totaling $55 million. Muvico will continue to operate 10 theaters in Florida, but an exhibition source estimated that the theaters sold to Cinemark were the most profitable in Muvico's circuit, producing 80% of its cash flow.

Stifel Nicolaus analyst Drew Crum said there would be good interest in "piecemeal" bidding on National's theaters.

"People might be interested in some of the New England-based assets," Crum said. "But financially, I don't know if even Regal is in a position to consume all of the theaters up for sale."

Regal is the nation's largest circuit, followed by AMC Entertainment and Cinemark.

It's expected that Sumner Redstone's daughter and National president Shari Redstone will continue to operate any unsold theaters. But after recent tensions between the Redstones, it's unclear whether there would remain a corporate tie between National and Viacom over the longer haul.

Equally uncertain is whether the elder Redstone has a Plan "B" in sorting out his financial affairs, should some number of National assets prove unsellable.