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Warner Bros. Interactive planning to buy Midway

• By McKinley Noble
• May 21, 2009 15:46 PM PST
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Midway's financial troubles might get some needed relief: Warner Bros. Interactive has made a bid to buy the company.

It looks like Mortal Kombat 9 might be saved from Midway's financial woes, as the company has now entered a business deal with Warner Bros. Interactive. Despite Midway's recent filing for bankruptcy earlier this year (and rumored plan of selling their creative rights to Mortal Kombat), Warner has just announced that they have started a "stalking horse assets purchase agreement" with Midway. Basically, Warner Bros. will be buying up Midway's U.S. assets, including their development studios in Chicago and Seattle.

Warner's starting bid for Midway: $33,000,000. 'Cause Kitana doesn't come cheap. Rowr.

Of course, this deal isn't exactly lock-and-stock. The press release below is basically a signal for other big companies to offer Midway a buyout, which will include a business auction headed by the U.S. Bankruptcy Court. Still, I doubt that anyone's going to try going head-to-head with Warner Bros over the purchase, since they're essentially a small part of industry giant Time Warner.

If everything works out, though, this would be a good reason for the Mortal Kombat team to sack up and stay with Midway's company.

CHICAGO -- May 21, 2009 -- Midway Games Inc. today announced that it has entered into a "stalking horse" asset purchase agreement with Warner Bros. Entertainment Inc., a subsidiary of Time Warner, Inc. (NYSE:TWX), and filed a sale and bid procedures motion with the Bankruptcy Court to conduct the sale of the Company's assets pursuant to Section 363 of the United States Bankruptcy Code. The bid procedures will provide for notice to be given to third parties of the pending sale to Warner Bros. Entertainment and offer the opportunity for interested parties to bid on the Company's assets.

Under the agreement, Warner Bros. Entertainment would acquire substantially all of the Company's U.S. assets including its Mortal Kombat franchise and its development studios in Chicago and Seattle for a purchase price of $33,000,000, subject to adjustment as of the closing for changes in inventory, plus the agreed value of the Company's U.S. account receivables. The agreement does not include the Company's development studio in San Diego and the TNA franchise games, nor does it include the Company's development studio in Newcastle which had developed the Company's recently released Wheelman game.

Prior to court approval of the Warner agreement, there will be a court-supervised auction process to facilitate competitive bidding by other qualified buyers. This process is intended to achieve the highest value possible for the Company's stakeholders. The bidding procedures, if approved, would require interested parties to submit binding offers to acquire some or all of the Company's assets within approximately 30 days of court approval of the bid procedures. Assuming qualified bids are submitted, an auction would be held a few days prior to the sale hearing. A court hearing approving the sale to the winning bidder or bidders would be held soon after the conclusion of the auction, followed by a final closing.

Once the bid procedures have been approved by the Bankruptcy Court, the Company will announce the initiation of the formal bidding process, and at such time interested parties will be asked to contact the Company's financial advisor, Lazard, for more information on the bidding process.

THE VERDICT by McKinley Noble As long as I get another good Mortal Kombat game, I don't care *who* owns the company.

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