Viacom (VIAB): Monetizing Paramount Would Be Highly Accretive - Brean Capital

Brean Capital analyst, Alan Gould, believes there is a 50/50 chance that National Amusements, the Redstone's private company that has voting control of both Viacom (NASDAQ: VIAB) and CBS (NYSE: CBS), decides to recombine the two companies. A key factor will be whether CBS Chairman and CEO Les Moonves wants the scale, opportunity and challenges that Viacom provides vs. the more predictable growth of the current CBS without Viacom; which, in turn, will influence how much of a premium, if any, CBS would pay for Viacom.

A deal would be highly accretive to CBS’ EPS but would materially reduce its projected growth rate. Monetizing a minority stake in Paramount for over $4 billion would be highly accretive. Status quo, the analyst projects FY17 will be peak earnings, barring a dramatic change in the media network ratings or film success. The FY17 EPS estimate is $4.50. If VIA receives $4 billion for a stake in Paramount, and uses 1/2 to repurchase shares, FY17 EPS should rise to $5.30. The analyst's private market value estimate is $54 per share and the fair value target is $45, a 20% discount to PMV, or 10x current FY17 EPS.

No change to Hold rating.

For an analyst ratings summary and ratings history on Viacom click here. For more ratings news on Viacom click here.

Shares of Viacom closed at $44.80 yesterday.

You May Also Be Interested In

• Tesla touts acceleration of new models, but Q1 results fall short of estimates
• Artisan Partners Asset Management (APAM) Misses Q1 EPS by 1c
• Veritex Holdings (VBTX) Misses Q1 EPS by 2c