Viacom CEO Expects "Compelling" Deal for Sale of Paramount Stake by Mid-Year

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Viacom executive chairman and CEO Philippe Dauman

With management saying the studio will record a loss this fiscal year and weakness elsewhere, Philippe Dauman says the company eyes a return to growth in fiscal year 2017 and touts "substantial" content investments.

"There is strong interest from around the world" in Paramount Pictures, and Viacom expects “a compelling result” in a deal to sell a minority stake by mid-year, executive chairman and CEO Philippe Dauman said Thursday on the company's earnings conference call.

The deal will be "both a strategic driver" and "reflect the significant value of Paramount, which after all is one of the greatest studios in Hollywood with a 100-plus-year history."

The process to sell a minority stake in Paramount "is continuing" with the company "on track" to secure a deal by mid-year, he said, highlighting that "the strategic and valuation possibilities are compelling." Said Dauman: "A strong strategic partner for Paramount, particularly one that provides international and/or technological clout and expertise, will provide important benefits to both Paramount and Viacom."

The company is in the process of looking at how to best use the proceeds, he said. Dauman also outlined the next steps in the process to find a deal partner. "We are in the final stages of winnowing down [the list of suitors] from over 40 companies that expressed interest to a handful of strong players," he said. "They will be receiving management presentations from this period until mid-May, after which we will get into detailed negotiations, discussions, diligence, all with a view to entering into an agreement ... by the end of June."

Acknowledging "disappointing" Paramount results in the quarter, Dauman highlighted such "promising" upcoming releases as Teenage Mutant Ninja Turtles: Out of the Shadows, Star Trek Beyond, Jack Reacher 2 and Ben Hur. But management said due to the $136 million film unit loss in the latest quarter, Viacom will record a film loss for the current fiscal year.

Dauman on Thursday focused on the upside opportunities for the company, saying it continues to make "substantial" content investments and expects solid single mid-digit growth in 2017 and beyond in affiliate revenue after a temporary slowdown. He also highlighted the company's international businesses as underappreciated. "Viacom’s international media networks performance continues to be strong with even more growth on the horizon," he said.

"Our entire management team is completely focused on putting the building blocks for growth in place this year. We have a smart strategy and are investing in our properties in the U.S. and around the world, setting us up to become a growth story in fiscal [year] 2017 and beyond," concluded Dauman.

The company's film unit posted a $136 million quarterly loss, while its TV networks posted lower-than-expected U.S. advertising and affiliate fee revenue.

Viacom earlier this month struck a new distribution deal with Dish Network for 18 channels, including some that will go on Dish’s skinny-bundle offering, Sling TV. Some analysts said if Viacom had lost the Dish carriage deal, it would have cost the conglomerate $800 million a year in profit. "The continuing strength of our brands was validated by our recent renewals with Dish and Frontier on attractive terms," Dauman said in a release, and on the call called the deal an "important moment" for the company.

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