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07 Sep 1999
MOODY'S REVIEWS RATINGS OF VIACOM INC. AND CBS CORP. (BOTH RATED Baa3 SENIOR UNSECURED) FOR POSSIBLE UPGRADE FOLLOWING MERGER ANNOUNCEMENT
Moody's Investors Service has placed the ratings of the long term debt of CBS Corp. and its subsidiaries (senior unsecured at Baa3 for CBS) and Viacom Inc. and its subsidiaries (senior unsecured at Baa3), as well Viacom's Prime-3 short term rating, on review for possible upgrade. The rating action follows the announcement today of the planned merger of the two companies in an exchange of shares that value the combined enterprise at approximately $80 billion. The review will focus on the operational benefits of the merger, the outlook for operating performance of the various business units and potential reduction in event risk that results from the combination. The rating agency will also assess the integration challenges of the merger, the evolution of a strategic direction for the combined enterprise and the company's tolerance for financial risk, including potential acquisitions and share buybacks.
The proposed combination will result in the creation of a large and widely diversified media company, with leading positions in broadcast TV, cable TV networks, radio, outdoor advertising, and TV and feature film production. However, under current FCC guidelines, the combined enterprise would need to divest certain of its TV operations. The merger agreement calls for CBS shareholders to receive 1.085 shares of Viacom Class B shares for each share of CBS. As a result, no incremental debt is to be created as part of the transaction. Both companies have historically maintained a strong focus on shareholder value, including share repurchases, an approach which is expected to continue at the merged company. Each of the companies has recently reduced its financial leverage, although CBS continues to retain some modest legacy liabilities from its Westinghouse operations. Both companies' ratings included an assessment of event risk, which is expected to be moderated by the proposed merger. The market position of the new organization would likely limit the number of prospective acquisition targets, while the increased size of the enterprise would allow for incremental flexibility for debt financed acquisitions. Pro forma results for 1998 reflect revenues of $21 billion and EBITDA of $4 billion, compared with an expected combined debt load of approximately $10 billion, following the pending acquisition of Outdoor Systems by Infinity Broadcasting. Moody's review will assess the outlook for future operating performance and the impact of potential acquisition opportunities, share repurchase plans and asset divestitures/swaps on the company's leverage and coverage measures.
Viacom is a major diversified media and entertainment company which owns and operates basic cable and premium subscription television program services and is a producer and distributor of motion pictures and television programming. Viacom also owns TV stations, regional theme parks, movie theaters and a majority interest in Blockbuster Entertainment, the leading video rental operator. The company is headquartered in New York, New York. CBS Corp., headquartered in New York City, owns and operates the CBS television network, 15 television stations and two cable networks and owns 83% of Infinity Broadcasting Corp. Infinity, also headquartered in New York City, owns and operates a group of 163 radio stations and an outdoor advertising business.
No Related Data.
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