• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Consumer Discretionary

Viacom Deal to Sell Big Paramount Stake Worth the Wait

A potential deal with China's Dalian Wanda may not happen until there's a new Viacom board, but that could be a good thing.
By ERIC JACKSON Jul 27, 2016 | 09:00 AM EDT
Stocks quotes in this article: VIAB, AMC, CKEC

Viacom (VIAB) CEO Philippe Dauman has been working to sell a minority stake in Paramount Pictures in order to raise cash for the company. Two weeks ago, reports emerged that a deal had been reached to sell a 49% stake in Paramount to China's Dalian Wanda. According to these reports, Wanda was willing to place an overall $10 billion valuation on Paramount. That's much higher than expectations earlier this year, when Dauman first announced his intention to sell a partial stake; at that time, most analysts thought Paramount was worth $4 billion to $5 billion.

On the surface, this is a very good deal for shareholders. Indeed, we had advocated for a stake sale like this to help demonstrate to the market the true value of Paramount.

Wanda is a strategic partner for Viacom. Some investors we have spoken to in the past couple weeks don't seem to grasp how large and influential Wanda is today in the global media world.

Wanda is the largest theater owner in China. Some analysts estimate 50% of future box office receipts will come from that country. Through its ownership of AMC Entertainment Holdings (AMC) , Wanda owns the most theaters in America, and it has been pursuing the No. 4 U.S. player, Carmike Cinemas (CKEC) . Wanda also is going to become the largest theater owner in Europe through its $1.2 billion Odeon and UCI purchase.

Wanda's Wang Jianlin is worth more than $30 billion himself and is on track to do $16 billion of merger deals this year.

Wanda's purchase of Legendary Pictures last January for $3.5 billion caused waves in Hollywood. However, it also led to the breakthrough development of "Warcraft." Although the film tanked in the U.S., it raked in more than $150 million in Chinese box office receipts in the first five days of release there. Legendary now has green-lit the film adaptation of Pokemon Go.

If the future of Paramount and all of Hollywood is in China, Wanda would be an excellent partner. And $10 billion is a very robust valuation for Paramount considering that Viacom's market cap is less than $20 billion.

However, Viacom's Dauman has been engaged in a corporate governance battle with controlling shareholder National Amusements over the last few months and, 10 days ago, National Amusements put out a statement opposing the sale of the Paramount stake.

National Amusements wasn't saying it is against a deal with Wanda per se nor against the concept of a minority stake sale in Paramount. Instead, National Amusements said it wanted a new Viacom board in place to make this decision rather than the current one.

National Amusements removed Dauman and four other directors several weeks ago and replaced them with five new candidates to improve Viacom's corporate governance. Dauman naturally opposed this move and sued to block it. The courts will weigh in soon on this matter, but all indications are they will support National Amusements' right to take these actions.

Although the dispute might delay a deal with Wanda (or potentially other players), it appears that minority Viacom shareholders will do better with National Amusements' new board slate in place.

If Wanda wants to do a deal now, it likely will still want to do a deal with the Redstones in a few weeks when the new board is in place. The price for the Paramount stake could go down, though that appears unlikely if there are other potential partners for Paramount or Viacom as a whole showing interest.

Also, Dauman gave Viacom notice in late July that he might tell the company in one month that he considers himself to have received constructive dismissal in the next 30 days. With that, he would likely ask for his severance package. If he did, the path would be clear for the new board and for a potential Wanda deal then.

Like other Viacom shareholders, we want to see a much higher stock price for the company. The Wanda offer for the Paramount stake seems like a good step in that direction. If we have to wait a few weeks to see the new board put in place for that deal to happen, that's fine, especially if it leads to more bidders expressing interest.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, the author was long VIAB.

TAGS: Investing | U.S. Equity | Consumer Discretionary | Mergers and Acquisitions | Stocks

More from Consumer Discretionary

Fossil Group Sounds the Alarm While NL Industries Rewards Its Shareholders

Jonathan Heller
Aug 12, 2022 10:30 AM EDT

The former signaled lower revenues for the year while the latter declared a healthy special dividend.

Disney Is Firming Up a Bit Ahead of Earnings

Bruce Kamich
Aug 8, 2022 8:36 AM EDT

The charts of the entertainment giant are modestly positive before it reports fiscal third-quarter results after Wednesday's close.

Put e.l.f. on the Shelf as the Stock Surges to a 52-Week High

Bruce Kamich
Aug 4, 2022 2:31 PM EDT

Here's why investors should consider taking profits now.

Mixed Earnings Bag Requires Diligence Among Momentum Traders

Bob Byrne
Aug 3, 2022 8:48 AM EDT

Stocks are moving abruptly and dramatically depending on which way quarterly reports go for the companies that deliver them.

Church & Dwight Reverses Direction After Earnings: What the Charts Say

Bruce Kamich
Aug 1, 2022 10:45 AM EDT

Shares of the consumer products company tumbled after quarterly results.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 09:40 PM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    To Improve Your Trading and Investing, Spend More ...
  • 08:44 AM EDT PETER TCHIR

    CPI Beats Expectations, But Maybe Not the 'Whisper'?

    Slightly better-than-expected inflation across the...
  • 01:44 PM EDT STEPHEN GUILFOYLE

    This Holding Lights Up With Strong Earnings

    Check out the latest from TheStreet's Stocks Under...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login