Wednesday, August 16, 2000
Viacom said Tuesday that it will pay about $15.5 billion to acquire the 36% that it does not own of radio and billboard powerhouse
Infinity Broadcasting, according to numerous published reports.
The deal, subject to the approval of Infinity's independent directors, was not unexpected. Viacom Chairman/CEO
Sumner Redstone and President/COO
Mel Karmazin have repeatedly expressed their
view that Infinity's stock was undervalued on Wall Street and that they would buy back the shares if its value did not
rise,
The Hollywood Reporter said.
The radio and billboard company was one of the strongest sources of advertising revenue for former parent
CBS. After its May 4 merger with Viacom, it was the biggest divisional contributor to the merged company's second-quarter results.
By moving to 100% ownership, Viacom hopes to boost the value of its own shares and enjoy a stronger earnings contribution from Infinity.
"This is a move Viacom has alluded to in the past,"
ING Barings analyst
Spencer Wang said. "Management has always believed Infinity was undervalued."
Viacom insisted that the timing of the move—just days after it was outbid by
News Corp. in the sale of TV station holding company
Chris-Craft Industries—was coincidental and that the events are unrelated.
"With both Viacom's and Infinity's core businesses performing at
record levels, it is the perfect time to bring them more closely together," Redstone said.
Viacom will buy back all of Infinity's 387 million class-A shares for 0.564 of its own class-B shares, effectively paying about $40 a share for the remainder of Infinity.
With 166 stations, Infinity is the second-largest U.S. radio group. It is the world's largest outdoor-advertising business. It also holds a minority equity stake in Los Angeles-based radio broadcaster
Westwood One.