Viacom confirmed what many equity analysts had anticipated: It is looking to possibly sell of one of its businesses -- Paramount Pictures.
“We have received indications of interest from potential partners seeking a strategic investment in Paramount Pictures, and I have decided to pursue discussions with a select group of potential investors,” said Philippe Dauman, executive chairman, president/CEO of Viacom, in speaking at the Jefferies Media & Communications Conference in New York City.
Todd Juenger, senior analyst at Bernstein Research, believes Viacom could get $4 billion for a sale of the movie studio.
Juenger says other Viacom business units would also make sense to sell, including BET network, which he valued at $3 billion; its U.K. TV network Channel 5, $400 billion; its other international TV networks, $1 billion.
In early morning trading of its stock, Viacom’s stock shot up 6%. Later in the day, it gave back those gains to rise 1.7% to $37.50.
Over the past year, Viacom’s stock price has been cut approximately in half. In February 23, 2015, its stock has traded at $70.32.
Viacom has seen an overall decline in audience levels for many of its U.S. networks over the last several years, but a slight uptick recently — and weaker advertising revenues.
Analysts are also concerned about slower growth affiliate revenues for those channels — a key piece of the company’s overall financial picture. Juenger believes “the best case expectation for affiliate fee revenue going forward is somewhere in the low single [digit percentage gains].”
In Viacom’s favor is some healthy cash flow. It generated $2 billion to $3 billion a year in earnings before interest, taxes, depreciation and amortization. Juenger says: “And it's not going to zero overnight. That has value.”