Viacom, the media conglomerate that owns CBS and MTV, said yesterday that its board had unanimously approved a plan to split the company...
NEW YORK — Viacom, the media conglomerate that owns CBS and MTV, said yesterday that its board had unanimously approved a plan to split the company into two separate entities, one focusing on broadcast television and the other on cable networks.
Viacom said the split will occur in the first quarter of 2006. Viacom CEO Sumner Redstone will be chairman and controlling shareholder of the companies, which will both be based in New York.
The company said the separation will be made through a tax-free spinoff, meaning that holders of Viacom shares will receive shares of a new company called CBS, that will include the CBS and UPN networks, a group of TV stations as well as a major radio and outdoor-advertising group.
The new CBS company will be led by Les Moonves, the current head of CBS and co-president of Viacom. The other company, which will retain the Viacom name, will include MTV, Nickelodeon, BET and several other cable networks as well as the Paramount movie studio. That company will be led by Tom Freston, the longtime chief of MTV and Viacom’s other co-president.
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Viacom had announced in March that it was considering a plan to split itself into two companies, saying it wanted to allow investors to value its array of businesses separately.
The company decided to pursue the breakup after becoming frustrated with its languishing stock price. Viacom’s shares traded as high as $75.88 in July 2000, but have generally struggled since then, finishing up 11 cents at $34.21 yesterday.
Viacom hopes that the MTV-based unit will attract investors seeking fast-growing businesses, while those seeking dividends and more aggressive share buybacks will buy shares in the new CBS, whose businesses are slower-growing but still generate a lot of cash.
The split also resolves the pressing issue at Viacom of who will succeed Redstone, who turned 82 last month, as chief executive. Before the split-up plan was announced in March, Freston and Moonves had been seen as competing to succeed Redstone as CEO.
Redstone said in a statement that the breakup would create two “strong, focused and nimble companies” that would give investors options that are “more closely aligned with their various investment objectives.”
Viacom also said Redstone’s daughter Shari Redstone would take the newly created position of non-executive vice chairman of the board. She had been a member of the company’s board since 1994.
Harold Vogel, head of the investment firm Vogel Capital Management, said that while the breakup would “focus the stocks a lot more,” it would also cause the companies to incur many new expenses, including having two sets of chief financial officers, legal and compliance departments.
Viacom said it would make further announcements in the coming weeks about the split-up’s schedule, the management lineups for the two companies and their financial structures.