Viacom Board Approves Separation
Viacom’s board of directors has given the greenlight to the company’s split into two separate entities through a spin-off to shareholders. Both companies will be publicly traded.
Current Viacom shareholders will continue to hold shares of both companies. The transaction is expected to be tax-free for them, and it should be completed before the first quarter of 2006.
The new company created through the spin-off will retain the Viacom Inc. name and will be led by Tom Freston. Among the brands included in the new Viacom are MTV Networks (including MTV, VH1, Nickelodeon, Nick at Nite, Comedy Central, CMT: Country Music Television, Spike TV, TV Land and many other networks around the world), BET, Paramount Pictures, Paramount Home Entertainment and Famous Music.
The other company, to be called CBS Corporation, will be led by Leslie Moonves and will combine the CBS and UPN broadcast networks, Viacom Television Stations Group, Infinity Broadcasting, Viacom Outdoor, the CBS, Paramount and King World television production operations, as well as Showtime, Simon & Schuster and Paramount Parks. According to BBC News,
The demerger is seen as a radical solution to Viacom’s poor stock market performance in recent years.
The company believes that it has been held back by its ownership of increasingly mature businesses such as CBS and its Infinity Broadcasting radio operation.
Current Viacom Chairman and CEO Sumner M. Redstone will serve as Chairman and controlling shareholder of both companies. The headquarters will be in New York.
Summer Redstone had this to say, “Today we celebrate our past successes by stepping forward to embrace the future. This transaction is the logical extension of the strategic vision that created Viacom and recognizes the inherent diversity of our assets as well as the changing business environment.”
Filling the newly created position of Non-Executive Vice Chairman of the board is Ms. Shari Redstone. She was named by Viacom’s board of directors, and has been a member of that board for 11 years.
Board member and former Verizon Vice Chairman and CFO Frederic V. Salerno will fill the newly created position of Lead Independent Director.
“We believe that this transaction will enable Viacom shareholders to fully benefit from the important gains we realized in building this Company by fully unlocking our significant untapped potential and creating new opportunities to build on our leadership positions, maximize earnings growth and fully exploit our considerable strengths,” said Mr. Redstone. “…The Board believes that the transaction will provide current and potential stockholders with attractive investment options that are more closely aligned with their various investment objectives.”
Mr. Redstone will chair a Special Committee formed by the board aimed to assist and monitor the process of creating the two companies. Board members Shari Redstone, Frederic Salerno and Philippe Dauman will also serve on the committee.