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Viacom Looking to Sell Minority Stake in Paramount

23 Feb, 2016 By: Erik Gruenwedel

Media giant expects a deal in place by the third quarter

Viacom is in talks to sell a minority stake in Paramount Pictures, CEO Phillipe Dauman told an investor group.

Speaking Feb. 23 at Jeffries Media & Communications confab in New York, Dauman said Viacom had been approached by several “potential strategic investors” about the venerable studio, which has experienced rough fiscal times recently, including posting an operating loss of $146 million in the most-recent quarter.

“We believe pursuing a transaction with a strategic minority investor … would be a great benefit strategically and financially to both Paramount and Viacom,” Dauman said, adding that he had decided to go forward with “substantive” discussions with a select group of unnamed partners.

The executive said Viacom has engaged PJT Partners as a financial advisor on any deal. Due to the complexities of the discussions, including both financial and commercial, Dauman said he expected the process to take “a few months.”

The executive said the deal would generate needed funds to pay down existing debt, including near-term bonds, as well as help fund strategic opportunities going forward.

“We feel [a deal] will really enhance the Paramount business under [studio chairman] Brad Grey’s leadership. We’re excited by it,” he said.

Dauman said Viacom would continue to control Paramount, which in addition to movies is a major television show producer. The studio plans to increase its theatrical output this year, including greenlighting a “Transformers” movie on an annual basis beginning in 2017.

Regardless, the studio saw first-quarter revenue drop 15% to $612 million as a result of underperforming theatrical and home entertainment units. Paramount Pictures Home Entertainment saw revenue decline $77 million (24%) to $239 million due to an unfavorable comparison with carryover revenue from Transformers: Age of Extinction in the first quarter of 2015.

“2015 was a challenging year for Viacom, as it was for many in the industry,” Dauman said on the company's Feb. 9 fiscal call. [Paramount] has been, from a historical standpoint, in a brief income slump. Paramount is a valuable and significantly undervalued part of Viacom.”

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