Viacom Votes to Split Business

15 June 2005

The board of US media giant Viacom has voted in favour of splitting the company in two.

The move, first mooted earlier this year [WAMN: 18-Mar-05], will create one faster growing company generating acquisition funds. It will comprise Viacom's popular cable networks such as MTV and Nickelodeon together with Paramount Pictures and publisher Simon & Schuster. It will be led by co-president Thomas Freston and will retain the Viacom name.

The other company, to be known as CBS and headed by second co-president Leslie Moonves, will be built around TV network CBS, outdoor advertising and radio. It will pay dividends and buy back shares.

Viacom's veteran chairman Sumner Redstone (82) believes the split will increase the value of the company's shares, which have slumped 45% since May 2000. It is expected the de-merger will be completed early 2006.

Says Redstone, who spent two decades assembling his conglomerate: "The board believes the transaction will result in two strong, focused, nimble companies."

The companies will share some common directors including Redstone, who will serve as chairman of both, and his daughter Shari, who has just been appointed as vice-chairman of the Viacom board.

The restructuring plan has drawn a mixed response from analysts.

Harold Vogel, head of the investment firm Vogel Capital Management, says although the break-up will "focus the stocks a lot more" it will also cause the companies to incur many new expenses, including having two sets of chief financial officers, legal and compliance departments.

Data sourced from Adweek (USA); additional content by WARC staff