In recent years, media mogul Sumner Redstone has battled with his daughter and business partner, Shari, over their differing visions for the family business. Now, as they race to solve its looming debt problems, those divisions threaten to complicate make-or-break discussions about the future of the Redstones' holding company.National Amusements Inc., which holds the family's controlling stakes in CBS Corp. and Viacom Inc., among other things, has been in urgent discussions with lenders to restructure $1.6 billion of debt and escape a December deadline to pay off half of it. Those negotiations are far from over, but one thing is clear: The Redstones will almost certainly need to sell some holdings to bring their mass of loans and notes under control.
As their advisers explore options, two ideas have gained traction, people familiar with the situation say: selling part of the family's movie-theater chain, which Ms. Redstone runs and has expanded aggressively, or selling a stake in National Amusements, potentially diluting Mr. Redstone's control, or at least diluting his returns. Both alternatives could cause a tussle between father and daughter.
While the 85-year-old Mr. Redstone controls National Amusements, Ms. Redstone, 54, who is president, is leading the discussions with lenders. Mr. Redstone last month ruled out one option: selling Viacom or CBS or any of his family's shares in the two companies, beyond the $233 million worth he sold in October.
[all in the family]
This isn't the first time Mr. Redstone has faced tough choices about his empire. In the 1980s, when he bought Viacom, his lenders required him to sell assets over a two-year period to pare down the debt he took on in the deal. Mr. Redstone also has warred with other relatives over his holdings: He settled a lawsuit filed by his son, Brent, by buying out Brent's interest in National Amusements for about $240 million, adding to the company's debt load.
Already there are signs of family tension in the latest crisis: Ms. Redstone made a public statement as talks began, insisting the movie theaters weren't to blame for the company's predicament-something her camp suspected her father was suggesting behind the scenes, say people familiar with the situation.
Mr. Redstone responded by telling his daughter privately they need to focus on the bigger issue at hand, these people said.
Spokespeople for National Amusements, Ms. Redstone and Mr. Redstone all declined to comment.
Mr. Redstone and his daughter have long battled over the future of the movie-theater business. Ms. Redstone, who bares a striking resemblance to her father, is a big believer in the theaters, and has labored to upgrade them and expand the business abroad, moves that contributed to the company's debt burden. Despite making his start in that business, Mr. Redstone doesn't believe in it, and has at times pushed to sell it.
After a falling out last year, which at times reduced Mr. Redstone and his daughter to communicating only by fax, the two tried and failed to strike a deal whereby Ms. Redstone would take ownership of the theaters in exchange for her 20% stake in National Amusements.
Mr. Redstone owns the other 80% of the holding company, which also holds stakes in videogame company Midway Games Inc. and slot-machine company WMS Industries Inc.
People familiar with the situation say the theaters are the one asset that would be relatively easy to sell, especially if they could be offered for sale in regional groups to see which would raise the most money. Analysts value the entire chain, which owns around 1,500 screens, at about $700 million.
Unlike many chains, it owns, rather than leases, much of the real estate its theaters stand on. But as one of the few cash generators in the Redstones' portfolio, the business could be instrumental in meeting what could be significant payments in a debt restructuring.
The second idea -- selling a stake in the holding company -- is something that could be more appealing to Ms. Redstone because it would preserve the media empire. But anything other than a silent partner would probably be too much for Mr. Redstone to stomach, people familiar with the situation say. Indeed, the appeal of such an investment to an outsider would be as a path to possible future control, and any partner would probably want voting rights. Still, such an option is being explored, these people say.
For an easy cash fix, Mr. Redstone could sell his interests in Midway and WMS, people familiar with the situation say. The Midway holding has been another source of tension between Mr. Redstone and his daughter.
Ms. Redstone was opposed to Mr. Redstone's move to accumulate an 87% stake in the company, which cost National Amusements some $800 million, adding to its debt. Midway stock has fallen 97% in the past three years as it failed to develop new hit games.
One development that may ease tensions between the sparring relatives: Mr. Redstone's divorce from his wife. People familiar with the situation say Mr. Redstone became more distant from his daughter after marrying former school teacher Paula, 46, and moving to the West Coast.
People caution that the talks are at an early stage, and that Mr. Redstone, not his daughter, will have final say. Any deal with lenders, if there is one to be done, is unlikely before December, they say.
