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Warner Makes $33 Million Move On Midway Games
by Kris Graft
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May 21, 2009
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Warner Bros. has made a $33 million bid for the bankrupt Midway Games in a "stalking horse" asset purchase agreement that would include Mortal Kombat and Midway’s Chicago and Seattle studios.
The amount of the bid is over the target sale amount of $30 million that Midway expressed earlier this year.
Not included in Warner's bid are Midway's San Diego studio and the TNA franchise. The publisher's Newcastle studio, developer of the recently-released Wheelman is also not part of the Warner bid.
However, Midway corporate communications head Geoffrey Mogilner told Gamasutra in a phone interview that the Wheelman IP would be included in the Warner deal if it's approved. Mogilner said it was Warner's decision not to include those particular assets in its bid.
The addition of Midway would be a major step for Warner’s growing video game business. In recent years, Warner Bros. Interactive Entertainment has acquired Monolith Productions, Snowblind Studios and TT Games.
Warner’s move to buy Midway is still subject to court approval. In the meantime, Midway said there will be a court-supervised auction process that will allow other qualified buyers to make bids on the company, in order to maximize Midway’s sale value. Buyers would have to acquire Midway assets within 30 days of court approval.
In Midway bankruptcy filings obtained by Gamasutra, Midway and Warner agreed that if, as a result of the auction, "all or substantially all" of the assets that Warner is currently bidding on went to another party, Warner will be entitled to receive a break-up fee in the amount of $1 million from Midway.
In addition, Warner may also be entitled to receive the break-up fee if it calls off the deal due to it not closing by the termination date of July 15, 2009. Warner would also be entitled to up to $100,000 in reimbursement fees for out-of-pocket expenses.
Mogilner said that at this point in time, he's not sure what the likelihood is that Warner's bid will go through. "This is the initial bid. We're meeting with courts right now to set up a date to have a hearing on this particular bid." Court dates regarding the bid are slated for the weeks to ahead.
In a "stalking horse" bid, the seller, Midway, chooses a buyer from a pool of interested parties, which allows a bankrupt company to prevent selling off assets for too low of a price. After the prospective buyer and seller make that initial asset purchase agreement, other bidders may enter the fray.
Mogilner said that there are other undisclosed "interested parties" with which Midway has been speaking, although their immediate plans are unknown. Ultimately, Midway's goal is "to maximize the value of the company and the company's assets," according to Mogilner.
However, the corporate communications head said that the bankrupt company isn't necessarily looking to keep all of Midway's assets together when selling the firm, or splitting them up. "We're certainly going to look to maximize that value [in any case]", Mogilner indicated.
[UPDATE: Gamasutra speaks to Midway; details from bankruptcy documents added.]
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I know the suggest might be harsh, but based on Midway's performance there is no real economic or strategic value in the corporation.