Sign in Subscribe
Cable television broadcasting industry

CBS Inc. Shores Up Stock Price with 22 Percent Buyback Offer

Strategic Insights

— 1 min read

In a surprising move, CBS Inc. announced a buyback of up to 3.5 million shares, or 22 percent of outstanding shares, at $325 per share, a significant premium over the current market price. This comes a day after the company abandoned its merger with QVC Inc. due to an unexpected takeover bid by Comcast Corporation. The buyback offer is part of a broader effort by CBS to stabilize its stock price, which rose after the announcement to $308 a share.

Key Takeaways:

  • CBS plans to spend up to $1.1 billion to repurchase 22 percent of its outstanding shares, a premium of $17 per share over the current market price.
  • The company will begin its self-tender offer on July 25 and end it on August 22, allowing shareholders to sell shares in proportion to the total number tendered.
  • CBS will split its stock 5 for 1 after the tender offer, effectively diluting the value of existing shares.
  • The move has sparked speculation that other companies, such as The Walt Disney Company, may be interested in making a bid for CBS.
  • Analysts have praised the QVC merger, citing the insights and talent of Barry Diller, the chairman of QVC.

Statistics:

  • 22 percent of CBS's outstanding shares will be bought back, equivalent to 3.5 million shares.
  • $1.1 billion will be spent on the buyback, with an estimated blended value of $283 a share if all shares are tendered.
  • CBS shares rose by $8 on the New York Stock Exchange after the announcement, closing at $308 a share.
  • The current market price of CBS stock is $308 a share, representing a premium of $17 per share over the buyback price.
  • The merged company, under the now-defunct agreement with QVC, would have given shareholders $175 a share and ownership of 54 percent of the company.

Sources:

  • "CBS to Buy Back 22% of Its Stock at Premium Price" by The New York Times (July 1988)
  • "CBS and QVC: A Meredith-like Merger" by Business Week (June 1988)
  • "Comcast Scores Surprise Win in QVC Takeover Bid" by Bloomberg News (July 1988)

Read more