Analyst: CBS Corp. Should Buy Sony Pictures Entertainment

CBS Sony Logo Split - H 2012

CBS Sony Logo Split - H 2012

Pivotal Research Group's Brian Wieser said CBS would gain exposure in fast-growing countries.

CBS should buy Sony Pictures Entertainment, a Wall Street analyst said in a research note Tuesday.

Brian Wieser of Pivotal Research Group told clients that CBS will have cash for major acquisitions now that it has decided to turn CBS Outdoor in the Americas into an REIT while selling off the European portion of that business.

"First and foremost, among potential targets we think that at the right price, SPE offers a very strong fit for CBS," he wrote.

"If we assume SPE were worth around $10 billion in enterprise value and were capable of high-single-digit profit margins, such an acquisition would not be dilutive and would be strategically beneficial," wrote Wieser.

The analyst laid out several "improvements and related cost savings" of such an acquisition. He said CBS would gain exposure to fast-growing countries through Sony's cable networks, Showtime would be better able to expand internationally and that combining the two libraries would help CBS extract better terms from online distributors.

"While such a transaction might initially viewed negatively," wrote Wieser, "we believe that investors would eventually welcome the current CBS management team's oversight of a major studio given the financial discipline and strategic choices they would make with it."

The analyst also noted that CBS chief executive Leslie Moonves has expressed an interest in SPE.

"Moonves indicated in the press that SPE is the kind of business that CBS would be interested in purchasing," Wieser wrote. "However, Sony has reiterated several times that the division is not for sale."