Updated from 2:11 p.m. EDT
Media and entertainment giant
said Friday that it would buy the company that owns the
Black Entertainment Television
cable channel, ending speculation about the deal and gaining a chance to sell advertisers an even wider audience.
New York-based Viacom hailed the deal, valued at $3 billion, as a way to broaden its "already formidable presence as the largest national and local platform for advertisers." With its acquisition of
, which targets a black audience, Viacom thrusts itself into a key demographic area.
"They're trying to take large niches and piece them together to make a collective whole," said James Goss, who tracks Viacom for
Barrington Research Associates
. "They're putting together a jigsaw puzzle as a way to reach every portion of the population."
As owner of
, as well as a number of radio stations and other units, Viacom already has delved into a number of segments of the American public. With those businesses, it also is heavily reliant on advertising revenue.
In spite of worries about a slowdown in ad spending, fueled by the widely hyped decline in the dot-com sector, Viacom has sought to reassure Wall Street that it has sheltered itself from the difficult climate.
The purchase of BET, which in addition to the television network also has
The Cable Jazz Channel
among other businesses, may further ease concerns about economic factors influencing Viacom's ad revenue. BET, which became a publicly traded company in 1991, is the largest media and entertainment company focused on a black audience.
The two said they hoped to close the deal -- expected after reports this week said they were negotiating -- by early next year. Robert Johnson, who owns about two-thirds of BET, will remain chairman and chief executive of BET, reporting to Viacom President Mel Karmazin.
Under the terms of the agreement, Viacom said it would pay $2.5 billion in stock and assume about $570 million of BET's debt.
For BET, whose headquarters will remain in Washington, D.C., the agreement will provide financial and marketing support from Viacom. The arrangement also would yield a number of cross promoting opportunities for BET, which would be linked, for instance, with MTV and CBS.
In a conference call Friday, Johnson and BET President Debra Lee said the company's relationship with Viacom would strengthen, not suffocate, its independent black voice, and urged their counterparts at other black-owned media corporations to seek alliances that could expand their influence.
If skeptics "look backward, they would know that Debra and I are totally committed to serving the black community," Johnson said. "When African-American companies are growing in size and looking to leverage that size, it's a natural progression to align themselves with major media conglomerates."
Johnson added that the merger announcement by
sparked an interest in searching for a bigger partner. "We saw the AOL and Time Warner merger, and I realized that strong brands and strong content would be the drivers of value," he said.
Viacom finished Friday regular trading down $1.06, or 2%, at $57.88.