NEW YORK - Viacom Inc. said yesterday that it will buy BET Holdings Inc. for $2.9 billion in stock and assumed debt, adding the top cable channel aimed at black people to its stable of TV networks, including CBS, and big-city radio stations.
Viacom, the world's No. 3 media company, said it will issue about 40 million Class B common shares worth $2.34 billion, based on yesterday's close of $58.50.
The final purchase price will be based on the share price 20 days before the tax-free transaction is completed. Viacom also will assume about $570 million in debt.
BET founder Robert L. Johnson will remain chief executive officer and Debra L. Lee, president. Johnson, who owns about 63 percent of BET, and Lee, who owns about 2 percent, will report to Viacom President Mel Karmazin.
BET includes Black Entertainment Television, which reaches 62.4 million U.S. homes and has about $270 million in annual revenue.
Viacom wants to make the network as widely distributed as its MTV channel, which reaches about 75 million U.S. homes. It also aims to boost ad sales. Historically, advertisers have spent less to reach black audiences, so there's ample room for growth.
"Ad spending targeting African-Americans is growing faster than ad spending in general," Karmazin said. "We don't understand why every cable system in the U.S. wouldn't be carrying BET. There are African-Americans in every market in the country."
Johnson valued closely held BET at $2 billion to $2.5 billion in recent testimony before the Senate about his plans to start an airline.
BET is carried mainly in areas of the United States with large black populations, Karmazin noted in a conference call with analysts.
Viacom said it expects BET revenue to show "double-digit" growth in the first year after the purchase. He noted that blacks spend more on media per person than the general population and that black household income is increasing at a faster rate.
Viacom also will try to generate more revenue from BET by getting more cable operators to carry BET channels. Cable operators typically pay established channels a monthly subscriber fee for every customer on the system.
Viacom has plenty of leverage with cable operators because it owns some of the top-rated cable channels in the United States, including the music network MTV; Nickelodeon, the No. 1 children's network; TV Land, and VH1. Viacom can use that bargaining power to get BET on more cable systems, analysts said.
Viacom's Class B shares were off 62.5 cents to close at $57.88 on the New York Stock Exchange.
Liberty Media Corp., AT&T Corp.'s cable programming unit that is run by industry veteran John Malone, owns about 35 percent of BET.
BET first sold stock to the public in 1991 at $17 a share and was the first black-controlled company traded on the NYSE. Liberty and Johnson bought BET from shareholders two years ago.
In addition to Black Entertainment Television, Viacom's purchase includes BET on Jazz: Cable Jazz Channel, which is carried by cable systems serving about 4 million U.S. homes. Viacom will also get the BET.com group of Internet sites and BET Books, a publisher of romance novels.
Certain assets, including BET-themed restaurants, magazines, a dance club and pay-TV channel, will be retained by Johnson and Lee. Decisions about what will happen with those businesses "are forthcoming," said BET spokesman Michael Lewellen.
This year, Johnson agreed to buy some assets of US Airways Group Inc. at Ronald Reagan Washington National Airport, as part of UAL Corp.'s pending purchase of US Airways, and start a commuter line called DC Air. The airline venture is a private investment of Johnson's, Lewellen said.
Viacom said it will seek to promote BET across its media properties, including UPN, a broadcast TV network partly aimed at black audiences, the MTV and VH1 music channels and CBS.
BET Holdings will continue to be based in Washington, and Johnson and Lee will be in charge of programming. The company will be separate from MTV Networks, Viacom's cable unit that houses the company's other cable channels.
The purchase is expected to be completed early next year. After the transaction, Malone will own about 1 percent of Viacom. Johnson will own about 1.8 percent, said James Bombassei, a Viacom spokesman. Neither will hold any voting power, he added.