Viacom shares plunged nearly 9 percent, or $4.09 per share, to $41.51 each on
Monday, as investors feared a potentially heavy liability from outstanding
asbestos claims relating to the media giant's past industrial holdings.
Investors have been skittish since Friday, when Halliburton Corp., a
Dallas-based oil services company, said it owed $150 million in legal claims
regarding asbestos litigation. Halliburton shares dropped 43 percent on the
Viacom issued a brief statement Monday claiming that there was no negative
news regarding asbestos claims. The company added that its reserves and
insurance are 'more than sufficient to cover any potential claims.'
According to Security and Exchange Commission documents, as of Sept. 30
Viacom has more than 129,000 cases pending involving alleged asbestos-related
personal injuries. Those injuries, according to Viacom's March 28 annual report,
'allegedly occurred from use or inclusion of asbestos in certain products
supplied by previously divested industrial business, generally in the pre-1970
time period.' Viacom was neither a producer nor
seller of asbestos products.
The asbestos link is mainly tied to Viacom's 1999 takeover of CBS Corp.,
which was once owned by industrial giant Westinghouse Electric Corp.
UBS Warburg LLC media analyst Christopher Dixon said the concerns regarding
asbestos liability were 'overdone,' calling the Monday sell-off a buying
opportunity for investors. He reiterated his 'strong buy' rating on the stock
and raised his 12-month price target to $55 per share from $46 per share.
Dixon estimated that Viacom's potential liability to be between $200 million
and $300 million, or about $2,000 per claim.
'We believe the issue has taken on undue importance as related to Viacom's
exposure and would look to initiate additional positions at these levels,' Dixon
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