Sumner Redstone’s debt-reduction drive
Chris Forrester
15-10-2009


Sumner Redstone, aged 86, is selling two very large slices of his broadcasting Crown Jewels.

Redstone is selling off almost $1bn-worth of non-voting Class B shares in Viacom and CBS, and raising about $945m, which he says he will use to pay off much of his remaining debts. This time last year he owed $1.6bn. Even though the sale represents a reduction of his equity holdings in the two broadcasting giants by one-third, he still retains 75% voting control over the businesses despite his actual equity stake being 6% of CBS and 7% of Viacom.

In the process the sale removes the threat of a catastrophic sale of his ‘family’ business, the movie theatres within National Amusements, the company through which he holds his Viacom and CBS stakes.

“National Amusements will be out of debt with its existing creditors and will still control its most important assets,’’ he said. “We believe in the significant long-term value of Viacom and CBS Corporation, both of which are well-positioned for growth in this improving economic environment.”

National Amusements will sell off some theatres, including some sites in the Midwest of the USA, and Argentina. Its core US cinemas, as well as those in the UK, will stay in National Amusements.

Redstone’s move comes on the back of a recovery in US media stocks from last autumn’s price collapse. Viacom’s stock price has doubled, while CBS’s is up 4-fold.

At the end of the exercise analysts state Redstone’s remaining debt will be a very manageable $200m. But not all have welcomed the end-result.

Some had even hoped that the recent financial crisis would see the end of Redstone’s iron grip over Viacom and CBS. That isn’t to be. The sale also concludes a particularly tough year for octogenarian Mr Redstone. A year ago exactly this week (Oct 17) it emerged that his second marriage was over (to Paula Fortunato, 39 years younger than Mr Redstone). He has also had some highly public spats with his daughter Shari Redstone (at one time the nominated heiress to management of his fortune, although the legacy reportedly goes to his grandchildren).