"We believe that the sales will remove an overhang from the stocks and likely provide a buying opportunity for the most attractively priced stocks in major media," writes UBS entertainment/media analyst Michael Morris.
In midday trading, CBS was up slightly, four cents to $12.19. Viacom was off 12 cents to $28.58.
Morris goes on to say: "CBS' strong ratings and commitment to broadcast currently have the company better positioned to outperform in a recovery." But he adds that "CBS has high advertising exposure," since 70% of revenue comes from advertising.
For Viacom, Morris says the move comes as it trades at a price/ earnings discount of 15% to other media companies, and 35% to Scripps Networks and Discovery Networks.
National Amusements plans to sell about $600 million in Viacom shares and $345 million in CBS stock, as well as some other "non-core assets," according to a recent company statement. But Redstone will not be losing any of his control, since he is selling those nonvoting B shares in the companies.
For months, its massive $1.46 billion in debt has hung over the head of National Amusements. The company said the sales would pay off all existing creditors.
Since March, the recent uptick in stock prices for both Viacom and CBS has given Redstone the financial wherewithal to make the move. Previously, Redstone considered selling its movie theater interest in the U.S., United Kingdom and Brazil.