Time Warner may bid for Chicago-based Midway games

Midway Games Inc., the bankrupt creator of the "Mortal Kombat" video-game series, may receive a buyout offer from Time Warner Inc., according to people with knowledge of the situation.

Warner Bros. is preparing a bid and is among several suitors for Chicago-based Midway, said the people, who declined to be identified because the talks are private. Midway filed for bankruptcy in February, two months after Sumner Redstone sold his 87 percent stake to investor Mark Thomas for $100,000.

Media companies including Vivendi SA, Viacom Inc. and Walt Disney Co. view video-game producers as a logical addition to their businesses. With Midway, Time Warner would add the "Mortal Kombat" franchise created in 1992. It has gone through several arcade and console variations and inspired two movies, both from Time Warner.

Fewer than five bids for Midway are expected, one of the people said yesterday. Specifics of the proposal from New York- based Time Warner, the parent of the HBO and TNT cable networks, weren't available. A sale needs bankruptcy court approval.

Geoffrey Mogilner, a Midway spokesman, declined to comment, as did Keith Cocozza, a Time Warner spokesman. The Web site MCV reported on Time Warner's interest earlier.

Redstone, chairman of CBS Corp. and Viacom Inc., sold his stake as part of an effort to restructure debts at National Amusements Inc., the family holding company. Midway owes National Amusements $20.1 million, court papers show.

Midway has struggled to develop hit games for the latest generation of consoles made by Nintendo Co., Microsoft Corp. and Sony Corp. The company listed assets of $167.5 million and debt of $281 million as of Sept. 30 in Chapter 11 documents filed Feb. 12 in U.S. Bankruptcy Court in Wilmington, Delaware. The 30 largest consolidated creditors with collateral backing their claims are owed a total of $256.2 million, court papers show.

Midway, trading at 7.5 cents, had a market value of $6.9 million at the close of trading yesterday. Time Warner gained 58 cents to $22.33 in New York Stock Exchange composite trading. The New York-based company's shares have fallen 33 percent in the past year.