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Midway initiates Section 363 process, Warner Bros. expected to bid

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midway logoMidway announced on May 21, 2009, that it entered into a “stalking horse” asset purchase agreement with Warner Bros. Entertainment Inc. and has 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. In other words, Warner Bros. is looking to bid on the company.

A “stalking horse” is a person who tests a concept with someone on behalf of an anonymous third party. If the idea proves viable and/or popular, the anonymous figure can then declare their interest and advance the concept with little risk of failure. If the concept turns out to be terrible, the anonymous party can either drop the idea completely or wait until a better moment for launching an attack.

Under the agreement, Warner Bros. will gain all of the company’s US assets including its Mortal Kombat franchise and its development studios in Chicago and Seattle for $33 million (subject to terms, of course). This agreement does not include the company’s development studio in San Diego and the TNA franchise games. It also excludes the company’s development studio in Newcastle which had developed the company’s recently released Wheelman game.

Warner Bros. still has competition and, prior to court approval, there will be a court-supervised auction so that other qualified bidders will get their chance too. This way the stakeholders can get the highest possible value for their shares. The bidding procedures, if approved, will allow potential buyers to buy some or all of the assets. 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.

What all this basically means is that, although Warner Bros. looks like the potential winner of the Midway company, there are still a few factors that effect it’s win. For instance, if another company is more interested then it will put in a higher bid and win the company. Plus, the fact that Warner Bros. is taking the “stalking horse” approach means that is is stil apprehensive about buying the company and is making absolutely sure this is a good investment.

I don’t care who wins the company, just as long as they don’t screw up the Mortal Kombat franchise and keep the original production staff.

Read [Business wire] Site [Midway]

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