Viacom reverses course
While in general, firms keep growing into bigger oligopolies, sometimes there are good financial reasons for splitting up again.
Media oligopoly Viacom has announced it will split into two components by early next year. In effect, the breakup will undo the 2000 ($35 billion) acquisition of CBS by Viacom. The part of the company that retains the Viacom name will hold on to many of the company's cable TV networks, including MTV, VH1, Comedy Central, BET, and Nickelodeon, along with the Paramount film studio.
The other part, taking the name CBS Corp., will own the a wider variety of properties: the CBS and UPN networks, pay cable network Showtime, publisher Simon & Shuster, the Paramount and King World TV studios, the Infinity Broadcasting radio network, the outdoor advertising group, and Paramount amusement parks.
The immediate cause is an attempt to improve the weak performance of Viacom stock, which has never done very well. According to some observers, the deal represents a separation of assets into a growth company (Viacom) and a mature, cash flow-oriented company that will concentrate on dividends (CBS). Viacom has been particularly successful at spreading its Nickelodeon and MTV concepts across the world. Network TV, book publishing, and amusement park are stuck in mature markets. The move might juice up the valuation of both parts.
.Of course, we can't forget that the biggest profits will go to those who make the deal happen. That will include CEO and major stockholder Sumner Redstone, who will, at least for now, remain CEO of both firms. "The age of the conglomerate is over," Redstone said at the press conference, and suggested that other media giants might follow suit.
Apparently, Redstone and the Viacom management team never could assemble the pieces in any way that enhanced their value for stockholders. There was apparently little synergy in the mix.
