Sane Debt-Reduction Move By Redstone; But Are There Saner Moves Still To Come?

Here’s why the Wall Street Journal‘s Martin Peers is one of my favorite business journalists covering Big Media. He wrote today, “Sumner Redstone is true to his word. He said a year ago that he did ‘not intend to sell one more share of stock in Viacom or CBS.’ Wednesday he said he would sell not one but maybe a combined 50 million more shares in the two.” This is also why we love writing about Viacom’s crazy old coot. Because you can’t predict from one minute to the next what the 86-year-old Redstone’s gonna do especially since he became so over-leveraged. But finally he’s helping pay off his family business National Amusements’ $1.46 billion debt and holding onto the bulk of its movie-theater chain except for selling 35 U.S. movie theaters outside of its core business in the Northeast. It’s even sane to now see opportunity in the stronger stock market — the Dow hit 10,000 just today! — and unload all those non-voting shares and even some voting stock in both Viacom and CBS since the share prices have doubled in recent months after hitting rock bottom prices during the worst of the financial crisis. National Amusements faced a $500M debt payment later this month, so the company said today it plans to sell about $600 million worth of Viacom shares and $345 million of CBS shares along with some non-core assets to pay off its creditors. The company said it has no intention of further decreasing its ownership, which now is between 6% and 8% from 10.6% of Viacom, and 5% and 7% from 10.5% of CBS. “As a result of our actions, National Amusements will be out of debt with its creditors and will still control its most important assets,” Redstone said in today’s statement.

I do disagree with Peers, however, regarding his suggestion that Redstone should start to unload Viacom’s valuable portfolio of cable channels now in a fire sale. No way, no how. If anything, he should find a way to bring back together all the assets under one roof — MTV Networks, CBS, Paramount, Nickelodeon, Showtime — and therefore gain leverage as DirecTV, Comcast, and the telcos become even bigger and more powerful. (Remember the bitchslap battle Viacom was in with Time Warner Cable a year ago?) He needs to align a recombined Viacom/CBS Inc with the right strategic partner now. For the record, here’s the announcement:

Announcement from National Amusements
NORWOOD, Mass.–(BUSINESS WIRE)–National Amusements, Inc. (“NAI”) announced today that with the one-time underwritten sale of a portion of CBS Corporation stock and Viacom Inc. stock owned by NAI, and with the anticipated sales of certain noncore assets, NAI will be in a position to pay off all of its existing creditors in full. The share sales and the asset divestitures will enable NAI not only to retain control of both CBS and Viacom but also to retain full ownership of all of its theater assets in the UK and Brazil and its core theater assets in the United States.

Viacom and CBS have filed documents with the Securities and Exchange Commission that will permit NAI to sell, in concurrent underwritten offerings, a portion of CBS and Viacom stock owned by NAI. NAI expects to receive gross proceeds of approximately $600 million in the offering of Viacom stock and approximately $345 million in the offering of CBS stock, assuming full exercise of the underwriters’ overallotment option. The proceeds from this sale, combined with proceeds from the asset divestitures, will be provided to existing creditors in accordance with the credit documents. NAI has no intention to further reduce its ownership levels in CBS and Viacom and will retain in excess of 75% of the voting control of each company after giving effect to the offerings.

“As a result of our actions, National Amusements will be out of debt with its existing creditors and will still control its most important assets,” said Sumner Redstone, Chairman and CEO of National Amusements. “We believe in the significant long-term value of Viacom and CBS Corporation, both of which are well-positioned for growth in this improving economic environment. Similarly, with leadership positions in key domestic and international markets, National Amusements theaters have outstanding near and long-term prospects.”

A world leader in the motion picture exhibition industry, the assets of National Amusements, Inc. include more than 1,500 motion picture screens in the U.S., U.K., Latin America and Russia; a portfolio of real estate assets; a partnership in the online ticketing service,; and controlling interests in the common stock of Viacom Inc. and CBS Corporation. Based in Norwood, Massachusetts, National Amusements is a closely held company controlled by Sumner M. Redstone.

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