EXCLUSIVE-UPDATE 2-Natl Amusements theaters on sale soon-sources

By Jui Chakravorty Das and Anupreeta Das

June 18, 2010 Updated Feb 18, 2009 at 8:11 PM EDT

NEW YORK (Reuters) - Sumner Redstone's National
Amusements is close to putting several hundred movie theaters up
for sale, people familiar with the matter said, in an auction
likely to help it pay about half its looming debt obligations.

An official sales prospectus on the theater chain is expected
to go out any day and bankers are reaching out to potential buyers
to get them to sign confidentiality agreements, the sources said.

All its U.S. theaters, except those in the New England region,
are expected to go on sale along with theaters in Latin America
and possibly those in the United Kingdom. The theaters in Russia
will be excluded from the sale, the sources said.

National Amusements operates more than 1,500 movie screens in
these countries. The New England region and Russia account for
roughly 300 screens.

Citigroup Inc will handle the sale, the people said.
Citigroup and National Amusements declined comment.

Analysts have valued the entire movie theater chain at about
$500 million to $700 million. But for a company seeking to
refinance $800 million in bank loans due in December, potential
buyers will likely low-ball their offers, considering the process
a fire sale.

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.

By those measures, the chain could go for anywhere between
$240 million and $480 million.

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.

Investment bankers also expect the chain to be split up, with
no single bidder buying all the theaters that will be on auction.

Valuating 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.

Last week, Redstone said National Amusements was close to a
deal with lenders to restructure its debt load of $1.6 billion.

The sharp drop in the value of Viacom Inc and CBS
Corp shares last year resulted in a breach of the debt
covenants and forced Redstone to sell more than $200 million of
stock in the two companies to satisfy lenders. National Amusements
owns controlling stakes in CBS and Viacom.

POSSIBLE BUYERS?

Possible buyers for the chain, or part of it, could include
Regal Entertainment Group, whose Chief Executive Mike
Campbell told the Reuters Media Summit in December he would look
at the chain if it went up for sale, but added that tight credit
markets could make it difficult.

On Wednesday, Regal Chief Financial Officer Amy Miles
declined to say if they were considering the acquisition but said
there had been an improvement in the credit markets since Campbell
spoke to Reuters.

"I think there has been an improvement in the credit market
-- this is for acquisitions in general -- there have been positive
signs in the credit market since the end of 2008," Miles said.

She added that Regal has historically been interested only in
U.S. theaters but declined to comment on Redstone's chain
specifically.

Most of National Amusements' theater screens are concentrated
in New England, the mid-Atlantic states and the Midwest.

The company has spent heavily expanding overseas in the United
Kingdom, Russia and Latin America, upgrading sites with stadium
seating and 3-D projection systems, and introducing Cinema de Lux
theaters where moviegoers can order cocktails with their popcorn.

Another possible contender could be Cinemark Holdings Inc
. Asked about National Amusements on a conference call in
November, Cinemark said it has the ability and would consider
takeovers based on price and the quality of theaters that become
available.

Cinemark did not immediately return calls seeking comment on
Wednesday.

Private equity-owned AMC, which merged with rival Loews in
2006, could also be a potential bidder. AMC did not immediately
return calls for comment.

With the formal sale process expected to begin soon, a first
round of bids could be due in about a month.
(Additional reporting by Gina Keating in Los Angeles and Paul
Thomasch in New York; Editing by Bernard Orr, Andre Grenon, Phil
Berlowitz)




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