Redstone increases stake in Midway

  • By Staff, GameSpot
  • Posted Jul 16, 2004 12:44 am GMT

The Viacom CEO's constant acquisition of shares has now pushed his ownership to just over 80 percent of the publisher.

The past week saw Sumner Redstone move closer to taking over Midway Games. The Viacom chairman and CEO made at least a dozen trades over the past six weeks, which increased his stake in the company to slightly over 80 percent. His most recent transaction was a purchase of 44,000 shares yesterday, which gave Redstone 55.2 million shares--80.9 percent of Midway's stock.

The significance of Redstone acquiring more than 80 percent of the company’s stock is put in perspective by Wedbush Morgan senior analyst Michael Pachter. “A shareholder with 80 percent or more ownership can essentially ‘freeze out’ minority shareholders," he said. “‘Freezing out’ means essentially that the 80 percent owner doesn't need to submit most actions to a shareholder vote. He can't sell the company without ensuring that the minority receives the same thing he gets, but other than that, he can do what he pleases.”

Redstone's recent moves come just over one month after he hired financial counsel to assess the possibilities of taking Midway Games private. The Viacom CEO and chairman is also stacking Midway's board in his favor, appointing his own daughter, Shari, as vice chairman of the board and former VU Games chairman Kenneth Cron as CEO. Both were elected to the board on June 10, 2004.

With Redstone's takeover of Midway now all but imminent, the question is, "What will he do with it?" The most prevalent theory sees Redstone acquiring sufficient Midway stock to take the company private and then selling the company to Viacom. Such a scenario would give the media a respected game-industry organization and would let it leverage its many brands--including MTV and Nickelodeon--without going through a third-party publisher.

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