declared a $5 special dividend Friday as the movie-rental chain prepares to part ways with parent
The Dallas-based company said the dividend is payable Sept. 3 to shareholders of record as of Aug. 27. The declaration comes two months after Viacom said Blockbuster holders would get a big payout as part of the two companies' separation.
Blockbuster said it would finance the payout with proceeds from its placement of $300 million in 9% senior subordinated notes, along with $650 million in term loans under its new credit line. Those deals both closed today as well.
said in June that the dividend payment will result in a $738 million tax-free payoff to Viacom, which for now owns 81.5% of Blockbuster's stock.
Friday's announcement comes six months after Viacom
announced it would shed Blockbuster. The movie-rental chain's profitable yet shrinking business is suffering from competition from mass-market retailers, operators of cable systems and satellite TV services, and entertainment alternatives such as mail-order DVD rental firm
"Viacom's separation from Blockbuster is a major event that begins a new chapter in the Viacom growth story and brings significant advantages for both companies as we pursue our separate paths to success," Viacom chief Sumner Redstone said at the time of the June dividend announcement. "Following the split-off, Viacom will devote all its energies and resources into expanding in core areas, particularly the content creation engines that we believe will drive our future performance."
Viacom had hoped to complete the spinoff of Blockbuster by mid-2004, though that deal has yet to close. Viacom's decision to spin the business off to shareholders came as a setback in February because it showed Viacom was unable to find a satisfactory buyer for the property.
On Friday, Viacom rose 71 cents to $35.70, and Blockbuster added 19 cents to $12.50.