Viacom May Not Split Off Blockbuster Stake
By Reuters Viacom is considering scrapping its long-standing plan to split off its remaining stake in the Blockbuster video rental chain due to weakness in Blockbuster's stock price and Viacom's proposed purchase of CBS, according to reports. CBS Chief Executive Mel Karmazin, who is slated to run the combined company after the merger of the two media giants, has told institutional investors in recent weeks that he is rethinking the split-off, the Wall Street Journal reported. Karmazin's position is that Blockbuster generates strong cash flow, has opportunities for synergies with the Viacom-CBS combine, and is undervalued by Wall Street, people who have met with him told the Journal. ""Mel thinks that it would get a higher cash flow multiple if it were owned internally,"" Storm Boswick, managing director of J&W Seligman, told the paper. Boswick heard Karmazin's comments at meetings in the last couple of weeks, the Journal said. People familiar with the situation also told the paper that Viacom chairman Sumner Redstone is not enthusiastic about the split-off either at Blockbuster's current market valuation. Redstone retains voting control of the company after the merger and will continue as chief executive officer. Viacom sold a 17.7 percent stake in Blockbuster to the public in August, and said in the prospectus it planned to split the remaining stake by giving Viacom shareholders the opportunity to swap Viacom stock for Blockbuster shares. Source: Reuters, Special to CNET News.com Story Copyright © 1999 Reuters Limited. All rights reserved.