Eyes are on chairman as Viacom readies split

Redstone says he won't sell either company


On Jan. 3, Sumner M. Redstone will get his wish when Viacom, the sprawling media company he built, is split into two separate entities.

Now what?

Even before the separation, the two companies - Viacom, which includes Paramount and cable networks such as MTV and Nickelodeon, and will be led by Thomas E. Freston; and CBS, encompassing the CBS network, television and radio stations, Simon & Schuster and an outdoor advertising business, to be run by Leslie Moonves - have been establishing their own identities. And lately, Wall Street has begun to show a bit of enthusiasm.

When the split was announced March 17, Viacom stock closed at $36.72 a share. By October, it had dipped to $30.06 a share, but it has since risen to close at $33.34 a share last Friday.

One question for investors is whether the split is a prelude to a buying spree; that is, does Redstone plan to build up two new companies, just as he built up Viacom the first time?

A bigger question is whether Redstone will decide to sell off assets if the split fails to bolster the stock price of either company.

Redstone, 82, who will remain chairman of each company, has always been focused on Viacom's stock price and has been vocal in his concerns about its decline.

Redstone adamantly denies that he has plans to part with either company. "I have no intention of selling," he said firmly in a telephone interview last week.

Some analysts are skeptical, pointing out that Redstone, who has rarely sold stock, has watched his Viacom holdings decline by roughly half, to $6 billion.

Redstone built Viacom into a media behemoth by acquiring Paramount Communications in 1994 for nearly $10 billion and merging with CBS in 1999 in a $37 billion deal.

At its height in August 2000, Viacom stock traded at $71.13 a share. Since then the stock has tumbled. Investors have worried that the radio station and television businesses were in jeopardy as new media outlets competed for audience and advertising.

To be sure, when companies get smaller, there is always the possibility that they will immediately turn around and race to make acquisitions, undermining the very reason they were overhauled. CBS said this year that it would spend $325 million to acquire the College Sports Network to increase its presence in cable sports.

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