Viacom to Sell 78% Stake in Spelling Entertainment for Up to $1.5 Billion

Strategic Insights -

Viacom Inc. announced yesterday that it plans to sell its 78% stake in Spelling Entertainment Inc., the producer of popular television shows such as "The Love Boat," "Melrose Place," and "Beverly Hills 90210." The sale is expected to fetch around $1.5 billion, as analysts believe the business and assets of Spelling duplicate Viacom's Paramount Television subsidiary. The move is part of Viacom's efforts to reduce its heavy debt incurred from acquiring Paramount Communications in 1994. The company hopes to use the proceeds from the sale to further cut its debt and achieve a balance sheet with an investment-grade credit rating.

Key Takeaways:

  • Viacom's 78% stake in Spelling Entertainment is being put up for sale, potentially fetching $1.5 billion.
  • The sale is due to the duplication of business and assets between Spelling and Viacom's Paramount Television subsidiary.
  • Viacom has been reducing its debt, which increased following the acquisition of Paramount Communications in 1994.
  • The company plans to use the proceeds from the sale to further reduce its debt and achieve an investment-grade credit rating.
  • Firms like Savoy Pictures Entertainment, News Corporation, and New World Entertainment are potential bidders for Spelling Entertainment.
  • Spelling Entertainment owns the syndicated rights to popular TV shows like "Dynasty," "Hotel," and "Fantasy Island," with an inventory of 15,000 episodes.
  • The company has also produced recent hits like "Beverly Hills 90210" and "Models Inc."
  • Viacom's stock showed little reaction to the announcement, with its class B shares slipping 25 cents to $48.75.
  • Viacom also plans to negotiate the purchase of Spelling's 22% stake in Virgin Interactive, owned by the company's board of directors.

Statistics:

  • Value of Viacom's 78% stake in Spelling Entertainment: $1.06 billion (based on yesterday's price of $12 per share)
  • Potential sale price: $1.5 billion
  • Total debt: $8 billion
  • Investment-grade credit rating: expected to improve Viacom's balance sheet
  • Number of Spelling Entertainment episodes: 15,000
  • Number of Republic Pictures episodes acquired in 1994: 7,000
  • Revenue: Increased with the acquisition of Republic Pictures in 1994 (chart and graph data)

Sources:

  • "Viacom Plans to Sell 78% Stake in Spelling Entertainment"
  • Blockbuster Entertainment Corporation
  • Spelling Entertainment
  • Paramount Communications
  • Tele-Communications Inc.
  • News Corporation
  • New World Entertainment
  • Smith Barney
  • Viacom Inc.