LOS ANGELES – Media conglomerate Viacom Inc. (VIAB) is considering entering the video game business and could acquire Midway Games Inc. (MWY), Viacom chief Sumner Redstone (search), who owns a controlling stake in Midway, said in a regulatory filing on Friday.
Three independent members of Viacom's board will work with Viacom management to evaluate opportunities in the games business, according to the filing with the U.S. Securities and Exchange Commission (search).
Analysts questioned why Viacom would consider buying Midway now, after its stock price has more than tripled this year, gains attributed almost entirely to Redstone's heavy and consistent buying of Midway shares.
"If Viacom wanted to buy this asset, why they didn't buy it nine months ago?" said Richard Greenfield, an analyst at Fulcrum Global Partners. "Why has Sumner bid up the price for [the] last nine months and then [they] have to pay a premium?"
He added, "Investors would look very dimly on an acquisition as the synergies are not that significant. Having a relationship with Viacom is fine; being a part of Viacom is unnecessary."
In late April, when Redstone first disclosed that he intended to take control of Midway, he denied any intent to sell the company to Viacom.
"I do not look at this as a Viacom agenda ... it's a personal investment," Redstone told reporters at the time. "I have absolutely no intention to dispose of Midway. Midway will be owned by myself and National Amusements, my company."
In early June, the Viacom chairman and chief executive, who holds 73.7 percent of Midway's stock, said he was exploring taking Midway private and had hired an adviser for that purpose.
More recently, Viacom has said it is interested in the growing market for advertisements in video games.
Midway has posted 18 consecutive quarterly losses, but under former Playboy executive David Zucker, who took over as chief executive in mid-2003, it has begun a turnaround and expects a profit by the fourth quarter of this year.
Of late, it has had success with games such as "NBA Ballers" and "The Suffering," and it recently signed a deal to publish new games in the popular "Unreal" franchise.
In his SEC filing, Redstone indicated that Midway could become a licensee of Viacom's intellectual property.
Midway shares pared initial gains and were up just 10 cents at $12.55 in midday trade, while Viacom shares were up 86 cents at $35.55, both on the New York Stock Exchange.
A Viacom spokesman said the three board members looking into the video game business were former Secretary of Defense William Cohen, former CBS Chairman David McLaughlin, and former Verizon Vice-Chairman Frederic Salerno.