Activist keen on tracking stock for Viacom’s Paramount studio
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One activist investor is calling on Viacom to turn its Paramount movie business into a tracking stock to help unlock shareholder value.
Viacom CEO Philippe Dauman said Tuesday the company is exploring the sale of a minority stake in the Hollywood studio behind “Zoolander” and “Transformers.”
The move comes amid intensifying pressure from shareholders to boost the sagging stock of the New York media giant, which is down 47 percent over the last year. In addition to Paramount, Viacom houses cable channels Comedy Central, MTV and Nickelodeon.
In a report released Friday morning, SpringOwl Asset Management’s Eric Jackson said the studio has been starved of cash and is undervalued. Any money it raises from a minority sale should be plowed back into the business, he wrote.
By creating a tracking stock for the movie unit, Viacom could lift the value. The studio, which is valued around $4 billion, should be closer to $5 billion, he added.
“We think the best solution is to turn Paramount into a tracking stock. Paramount should keep the money it raises from any sale to reinvest in its business,” Jackson wrote.
He also contends that Blackstone or its affiliates are working with Viacom to finalize a sale.
In the report, Jackson scolds CEO Dauman for holding Paramount’s purse strings too tightly while praising the studio’s management led by Brad Grey.
“How do you expect to throw a dinner party at your house, when your boss has sold your dining room table and chairs before anyone arrives?” Jackson wrote.
Paramount’s revenue has declined from $6 billion in 2011 to $2.9 billion in 2015, while operating income has fallen from more than $300 million to $111 million over the same period.
Jackson ended on an upbeat note, however, saying the potential Paramount sale is the first good sign from Viacom management in months. Viacom is controlled by 92-year-old media mogul Sumner Redstone, who stepped down as chairman of Viacom this month amid questions over his health and mental capacity.
The Post reported that a Chinese buyer is the most likely to bid for Paramount, with Jack Ma’s Alibaba and Dalian Wanda among the parties to have held talks.