Redstone's NA to sell more Viacom, CBS stock
Mogul to retain more than 75% control, pay off debtNEW YORK -- Sumner Redstone's National Amusements will take advantage of a rebound in stock prices since March to sell more shares of Viacom and CBS Corp. to raise about $945 million and get rid of its debt.
Importantly, the mogul's holding company will retain more than 75% voting control in each. It said it plans no further share sales.
Redstone had previously said he had no plans to further reduce his stakes in the two entertainment companies, but it seems the stock offerings were his best option at this stage.
After all, the news of the move Wednesday comes ahead of a key debt payment due later this month said to be $500 million.
NA said it is also continuing a sales process for its movie theaters outside of New England and New York, which many had hoped would raise the necessary cash to address its debt pile by now. But the auction has dragged on. The firm didn't say when it expects to wrap it up.
NA early Wednesday unveiled the one-time underwritten sale of a portion of its CBS stock and Viacom stock. Together with the anticipated sales of non-core assets, "NAI will be in a position to pay off all of its existing creditors in full," it said.
It will also retain full ownership of all of its movie theaters in the U.K. and Brazil and its "core theater assets" in the United States.
While Redstone had previously said he would not reduce his stakes in Viacom and CBS further, the planned stock sales are designed to help him pay off all NA creditors and get him out of a debt problem that has plagued him.
"As a result of our actions, National Amusements will be out of debt with its existing creditors and will still control its most important assets,'" said Redstone, who is chairman and CEO of National Amusements and chairman of CBS and Viacom. "We believe in the significant long-term value of Viacom and CBS Corporation, both of which are well-positioned for growth in this improving economic environment. Similarly, with leadership positions in key domestic and international markets, National Amusements theaters have outstanding near and long-term prospects."
NA plans to raise approximately $600 million through the sale of Viacom Class B stock and approximately $345 million through the sale of CBS Class B common stock.
To reach the $600 million figure, NA will also have to convert some Viacom Class A voting stock, through which it controls Viacom, into Class B stock. That minimizes the number of Class A shares NA must sell, minimizing the number of voting shares Redstone gives up.
Redstone controls Viacom and CBS through NA.
The holding company's debt issue came to the forefront amid the financial crisis and stock market sell-off.
The firm last fall sold $230 million in its holding in the companies.
It didn't say Wednesday if it would refinance any longer-term debt and how much.
Analysts said the CBS and Viacom stock sales should remove investor concerns about possible share offers at lower prices or other negative fallout from NA's debt load.
"We believe that the sales will remove an overhang from the stocks and likely provide a buying opportunity for the most attractively priced stocks in major media," said UBS analyst Michael Morris.
He likes CBS shares, arguing the firm has the "strongest broadcast assets, highest exposure to cyclical recovery." And Viacom shares are "relatively inexpensive versus peers," and possible upcoming upward earnings revisions should also help them, Morris argued.
CBS Corp. also came out Wednesday with a statement re-affirming its business outlook for the full year 2009. It still expects operating income before depreciation and amortization to be in the range of $1.725 billion-$1.925 billion.