Viacom gains on buyback, sell-off

CEO touts Par progress; Sony unit gets Famous Music

Shares of Viacom Inc. hit a 52-week high Wednesday as the company unveiled a $4 billion stock-buyback program, announced the sale of its Famous Music Llc. music publishing unit, and president and CEO Philippe Dauman said at its annual shareholder meeting here that he is bullish on the future of Paramount Pictures and the overall company.

Chairman and controlling shareholder Sumner Redstone lauded his management team's track record to date and the 29% stock increase it has overseen in less than a year. The stock went as high as $44.59 on Wednesday before closing up 1.5% at $44.53. The stock's previous year-high stood at $44.16.

Shareholders at the meeting defeated a proposal by three investors that Viacom sell the Paramount studio, with the plan attracting only 0.4% approval.

The event started just after Viacom announced an agreement to sell Famous Music — for an estimated and better-than-expected $370 million — to Sony/ATV, which is co-owned by Sony and trusts formed by singer Michael Jackson.

Top Viacom brass had a strong presence at the meeting, with Dauman welcoming Paramount Motion Picture Group chairman and CEO Brad Grey, MTV Networks chairman and CEO Judy McGrath, BET Networks chairman and CEO Debra Lee and Tom Dooley, Viacom senior executive vp and CFO.

Dauman lauded the executives' combined Viacom experience of nearly a century, earning laughs when adding, "And if you throw in Sumner … ."

Redstone on Wednesday lauded Dauman and his team for its strategic vision, financial discipline and creative excellence, saying it was "one of the wisest decisions I've ever made" to make Dauman CEO.

Overall, the chairman said he is "really confident" about the company's long-term outlook.

More specifically, Redstone added that the firm is "truly hitting its stride in the digital world."

Viacom's continued push into the digital space indeed was a key theme of the investor gathering. Asked by a young shareholder about possible original content creations in the digital world, Dauman reiterated that Viacom is planning to roll out new virtual worlds that are music-related and not based on existing Viacom brands.

As far as Paramount goes, Dauman lauded its "tremendous progress," adding, "We are enthusiastic about its short-term and long-term (outlook)." The shareholders proposing the Paramount sale had argued that past weakness at the studio had held back Viacom's stock and also criticized its films' depiction of smokers.

Dauman, however, touted his firm's upcoming films, including "Transformers," "Stardust" and "Beowulf," adding that the 2008 slate is "shaping up quite nicely" as well.

The Viacom CEO also said that there is a good opportunity in a direct-to-DVD business for Paramount and in creating more film labels based on Viacom cable networks, with BET Pictures launching this year.

Dauman did not comment on one shareholder's proposal that Viacom launch a Paramount Movie Channel based on the example of the Fox Movie Channel. Officials weren't available to comment on whether such a channel has been considered.

Ahead of Dauman and Redstone's bullish comments Wednesday, Miller Tabak + Co. analyst David Joyce also lauded the recent stock-price appreciation at Viacom, raising his price target on shares by $6 to $51 "to reflect a mix of cable network and studio entertainment businesses that are demonstrating the turnaround investors have started hoping for, reflected in the stock's price improvement, over the past six-plus months."

The Famous Music deal, meanwhile, comes after a sales process that began a few months ago.

"The Famous catalog is a world-class asset filled with evergreen songs that people know and love," said Martin Bandier, who recently left his post as head of music publishing at EMI Group Plc. to become chairman and CEO of Sony/ATV. "The addition of the Famous catalog and its songwriters to Sony/ATV is another step in our long-range growth plans."

Together with last month's acquisition of the Leiber Stoller music catalog, which includes hits like "Love Potion #9," the Famous deal "further enhances Sony/ATV's position in the global music publishing industry," Sony Corp. of America CFO Rob Wiesenthal said.

Jackson, who owns 50% of Sony/ATV Music Publishing, called the transaction "a milestone event," saying "the diverse collection of songs in this (Famous) catalog range from timeless classics to contemporary hits."

Founded in 1928, the Famous Music catalog includes 125,000 songs and sound cues, including such classics as "Footloose" and "Moon River" as well as popular themes from such films as "The Godfather," "Forrest Gump," "Mission: Impossible" and "Braveheart" as well as the "Axel F" theme from "Beverly Hills Cop."

In addition, the catalog includes such contemporary hits as "Bad Day" by Daniel Powter, Shakira's "Hips Don't Lie" and Eminem's "The Real Slim Shady."

As for the stock-buyback program, Viacom said that it has used up about $2.7 billion of an existing $3 billion repurchase plan, which will be completed. After that, it will buy back up to $4 billion of Viacom Class A and Class B common stock.

"We view this as a modest positive for Viacom as we believe that share repurchase is the best capital-allocation strategy for Viacom currently," Bear Stearns analyst Spencer Wang said.

Also at the shareholder meeting, investors raised concerns about Redstone's high salary, which he defended as "probably too low," and derogatory rap lyrics, with Viacom executives saying BET is committed to not allowing offensive lyrics on its air.

Rap lyric protesters were joined outside the Manhattan meeting by WGA representatives, who passed out leaflets as part of the guild's current campaign to organize six major shows on Comedy Central, including "Mind of Mencia," "The Sarah Silverman Program," "Reno 911!" and "The Showbiz Show With David Spade."
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