CBS Restructures Outdoor Biz

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CBS Corp. is shaking up its outdoor advertising business with a corporate restructuring that will divest CBS Outdoor’s overseas business and convert its U.S. business into a real estate investment trust.

The planned divestiture will affect CBS properties in Europe and Asia, where CBS Outdoor operates thousands of billboards as well as a variety of smaller signage.

According to the company, its European businesses include assets that represent around 50% of the overall outdoor market in the Netherlands, 23% of the outdoor market in the U.K., and 15% of the outdoor market in Italy, as well as 32% of the large-format roadside signage in France.

CBS Outdoor also controls substantial outdoor advertising assets in Canada, Mexico, and South America, which are not included in the divestiture.

Although the Asian outdoor advertising market is going strong, the advertising market in Europe has been hit hard by continuing economic uncertainty stemming from the Eurozone debt crisis. Earlier this month, eMarketer estimated that ad spending in Western Europe grew just 0.4% in 2012 compared to 2011, and forecasts modest growth of 2.4%, 2.6%, 2.0%, and 1.8% in 2013-2016, respectively. By contrast, eMarketer sees total ad spending in the Asia-Pacific region increasing 8.5% in 2013.

CBS is also converting its Americas business to a real estate investment trust, in a move that is probably intended to reduce its federal tax burden. A wide variety of commercial businesses can be converted to REITs, as long as they own property and agree to distribute at least 90% of their taxable income to investors. Federal law allows REITs to deduct dividends paid to investors from their total taxable income.

CBS Corp. president and CEO Leslie Moonves stated that converting the Americas outdoor business to an REIT “will achieve significant value for our shareholders.” If CBS gains approval from the Internal Revenue Service, the conversion to an REIT could be completed by the beginning of the 2014 tax year.

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