Eighteen months in, the debate continues over the value of splitting Viacom into the new Viacom, home of MTV Networks, and CBS. The latest round comes courtesy of WSJ, where the authors of the breakingviews.com column late last week tossed around a few numbers and came to the conclusion that the premise behind the split was faulty — and that the two companies “appear to be” working at cross-purposes. That drew a sharp response from Viacom EVP Carl Folta who, in the letters section of Wednesday’s Journal, calls the column’s take “simplistic and misleading” and says a “more complete assessment” would produce a different conclusion.
Breakingviews’ rationale for the split diagnosis: new Viacom shares are up only 8 percent since the split while CBS has returned 31 percent to shareholders (including dividends), outperforming its Redstone sibling by nearly four times. Folta contends that this ignores the stock’s performance since “the new team” — CEO Phillipe Dauman and TK — was put in place last September: up 26 percent.
The cross-purposes argument was spurred by the CBS acquisition of lastFM.com, a deal the writers think should have been made by Viacom. Their theory: Viacom and CBS both were interested in acquiring the UK start-up, pushing the price up for all bidders. Not so, according to Folta, who says Viacom’s interest was only preliminary and no bidding was involved.
CBS and Viacom are rivals, to be sure — with each other and with everyone else in the space. Would Viacom be better off intact? Verdict still out although the move has had more than its share of critics. It’s hard to think that CBS as part of Viacom would have come this far. As for the new Viacom, still playing catch-up.
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