Blockbuster owner to spin off stake
Viacom to exit video rental chain
February 10 2004
Media giant Viacom is demerge its 81 per cent controlling stake in video rental chain Blockbuster after failing to find a buyer.
Viacom, which also owns CBS television, Paramount Studios and MTV Networks, has been looking for a potential buyer for Blockbuster for some time.
The video rental market has been hit by sales of DVD. In response, Blockbuster has increased the amount of product it sells rather than rents, although it is competing with discounted DVD prices offered by general retailers.
In that climate, potential buyers for a business model which some analysts think has had it day have been thin on the ground.
Viacom shareholders will have the option to swap for Blockbuster stock at a yet-to-be determined ratio. Blockbuster said it would consider a sweetener dividend payout to shareholders, as an incentuve to hold on to the stock. Viacom expects to have completed the spin-off by mid-2004.
Viacom chairman and chief executive Sumner Redstone said: “We reached a decision to part ways with Blockbuster, which will allow each company to focus exclusively on its core businesses.”
In the last quarter, Blockbuster’s total revenue rose 2.2 per cent to $1.62bn, with a 12 per cent increase in merchandise compared to a 1.3 per cent decline in rental revenue. In the current quarter, it expects same-store sales to decline by a mid-single-digit percentage.
