Viacom Mulls Breakup
Updated from 4:03 p.m. EST
Faced with a stock that has gone nowhere for the last two years,
Viacom
(VIA) - Get Report
may break itself into two or more publicly traded companies, the media giant confirmed late Wednesday.
The goal, according to a statement by Chairman and CEO Sumner Redstone, is to "better deliver value to shareholders in a tax-efficient manner" by allowing them to pursue separate strategic paths. The company expects to release more details of the possible breakup during the second quarter of this year.
The news was apparently leaked to
The Wall Street Journal's
online edition a few hours before it was released, and investors promptly showed their enthusiasm, pushing the stock up $2.71, or 7.9%, to close at $37. The gains continued after hours; in recent post-close trading the stock was up another $1.34 to $38.34, a gain of 3.6%.
One spinoff might be a company that would combine CBS broadcast television assets with outdoor advertising and radio and be headed by Les Moonves. Another could be one build around MTV Networks and other cable properties, "which would be operated by Tom Freston, and could give us added flexibility to pursue internal growth," and generate cash for more acquisitions, Redstone said.
There's a certain irony in the possible move since many media companies spent billions of dollars as they made themselves over into conglomerates. But the strategy hasn't worked all that well for Viacom, whose stock has lost 12% of its value since 2003, while the
S&P 500
has appreciated by 37%.
Redstone is know for his intense focus on share value, and his frustration with the inert stock has been known for some time. Last year, the company spun off Blockbuster Video and took $2.8 billion in writedowns.