Blockbuster Will Pay Dividend
Before Viacom Sheds Its Stake
By JOE FLINT
Staff Reporter of THE WALL STREET JOURNAL
June 21, 2004; Page C4
Blockbuster Inc. is to pay a special dividend of $905 million to shareholders later this summer, right before
its biggest shareholder, Viacom Inc., sheds its 81% stake in the company.
Viacom and Blockbuster Friday announced details of the transaction that will separate them, four months
after Viacom revealed it was planning to unload its stake in the video-rental chain. As expected, Viacom
shareholders will get a chance to exchange their Viacom stock for Blockbuster shares, though the ratio of
the offer won’t be decided until the exchange starts. Viacom said it expects the divestiture to be wrapped up
by the third quarter.
Blockbuster, Dallas, has arranged a credit facility of $1.45 billion to finance the $5-a-share special
dividend. Viacom is expected to use its portion of the dividend, $738 million, to buy back stock. Viacom
stock closed Friday up 37 cents, or 1%, at $37.03 in 4 p.m. New York Stock Exchange trading. Blockbuster
fell 17 cents, or 1.1%, to $15.22.
Viacom, the New York-based media giant whose holdings include CBS, MTV and radio broadcaster
Infinity, had been under pressure from investors to shed Blockbuster. The video-rental business has been
under assault from mass merchants selling DVDs and on-demand movie services offered by cable
operators. Last year, rental revenue at Blockbuster stores open for more than a year fell 6%.
By shedding its Blockbuster stake, Viacom will be able to “devote all its energies and resources into
expanding in core areas,” Viacom Chairman Sumner Redstone said. Specifically, Mr. Redstone wants to
launch and buy cable networks. Last month, Viacom unveiled plans for a cable channel aimed at gays.
Blockbuster Chairman John Antioco, who signed a new employment agreement as part of the split, said in
a letter to Viacom stockholders that the video giant is now poised to transform itself into a specialty retailer
of home entertainment.
But at the same time, he warned of tough times. Blockbuster wants to become bigger in the selling of both
new and used movies and games. Mr. Antioco warned that costs related to these new businesses would hurt
profit this year.
Blockbuster also said the split would allow it to improve relations with other studios who viewed
Blockbuster as having a conflict because Viacom also owns Paramount Pictures.
Write to Joe Flint at [email protected]
URL for this article:
http://online.wsj.com/article/0,,SB108756739175941492,00.html
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