It looks like Sumner Redstone had to sell some of his media holdings after all.
Redstone, the mercurial chairman of Viacom and CBS, announced Wednesday that privately held National Amusements Inc., the Boston-based theater chain that houses his Viacom and CBS shares, would sell shares in both media giants worth $945 million to satisfy NAI debt. NAI and Redstone would continue to hold a controlling interest in both CBS and Viacom.
The deal includes the sale of about $345 million in CBS stock and $600 million worth of Viacom shares. According to a prepared statement, NAI will retain in excess of 75% voting control in CBS and Viacom.
In a statement, NAI said the sales would allow it to pay its creditors in full. CBS also reiterated its full-year 2009 outlook, anticipating cash flow in the range of $1.725 billion and $1.925 billion.
"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," Redstone said in a statement. "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."
The sale appears to end what has been a cloud of uncertainty surrounding Redstone's holdings in both media giants. Last October, he created a bit of a firestorm after NAI said it would sell about $233 million worth of Viacom and CBS stock to satisfy debt covenants. Fears that Redstone would be forced to sell even more shares hurt both stock prices.
In May NAI announced that it had agreed to restructure its debt with its lenders, and had hinted it would sell some of its theater properties to satisfy the obligations.
During a conference call with analysts in February, Redstone vowed that he would not have to sell any additional Viacom or CBS shares. Despite what Redstone himself had characterized as strong interest in the properties, no deal came to be. One likely reason: the logical buyers of the theaters -- Regal Cinemas, AMC Theaters and Cinemark Holdings -- are having their own debt problems.
In a research note, Miller Tabak media analyst David Joyce said the most recent deal shouldn't have as great an impact on either stock as Redstone's sale of shares last year.
"We do not expect these sales to scare the public market as much as last fall's CBS and Viacom stock sales by Redstone's NAI did, as that was more of an incremental surprise in a market that was facing worse surprises every day," Joyce wrote. "This NAI debt restructuring has been on Viacom and CBS shareholder radar screens since then, but with Redstone vowing no "intention" to sell shares, and with no buyer for his movie theater chain, capitulation to sell, while still retaining a 75% stake (through retention of his supervoting Viacom and CBS shares) was the only option."
Viacom shares were down 16 cents each (0.5%) to $29.93 each in early trading Wednesday, while CBS stock fell 22 cents each (1.8%) to $11.93 per share.
