Viacom plans to shed Blockbuster stake, takes $1.3 billion charge on value of business
Tuesday, February 10th 2004, 12:00 am
By: News On 6
NEW YORK (AP) _ Viacom Inc. announced Tuesday that it plans to shed its controlling stake in Blockbuster, the video rental chain, and take a $1.3 billion charge to write down the value of the business.
Blockbuster's business has been under pressure from cheap sales of DVDs through major retailers as well as emerging video technologies like video on demand.
Viacom had long been considering a disposal of its roughly 81 percent stake in Blockbuster, and was believed to be looking for a buyer in recent weeks. The company didn't disclose details of the transaction, and indicated that the plan was not yet final.
Viacom said it expected to separate Blockbuster in a tax-free split-off, which would most likely involve exchanging shares of Viacom for shares of Blockbuster. But the company said it would continue to consider other alternatives.
The company said the plan was subject to final approval from its board of directors as well as ``an assessment of market conditions.'' Viacom expects to complete the separation by the middle of the year.
Viacom, which also owns CBS, MTV and the Paramount movie studio, made the announcement on the same day it reported fourth-quarter and full-year earnings for 2003.
The company said same-store revenues in its video business were down 7 percent in the fourth quarter because of overall softness in the movie rental industry.
Viacom took the $1.3 billion charge under an accounting rule that requires companies to occasionally assess the value of the ``goodwill'' of its businesses.
Investors have been concerned about Blockbuster's prospects in the face of super-cheap sales of DVDs, and in recent months its shares have been hovering below $18.
Including the Blockbuster charge, Viacom reported a net loss of $385.4 million in the fourth quarter, or 22 cents per share, compared with earnings of $652.4 million, or 37 cents per share, in the same period a year ago. Revenues increased 11 percent to $7.52 billion from $6.78 billion.