IRS OKs tax-free sale of B’buster

Company plans to sell 31 mil shares to public

NEW YORK — Viacom said Tuesday that it has received a green light from the Internal Revenue Service for a tax-free sale of its full holding in Blockbuster anytime after Sept. 29.

Viacom, which owns 100% of Blockbuster, is preparing to spin off a minority stake of the company in an initial public offering that is expected next week. It wanted to split off the rest of the video retailer eventually as well, as long as the IRS ruled, as it did Tuesday, that such a split would be tax free.

Sept. 29 marks the five-year anniversary of Viacom’s acquisition of Blockbuster. A sale of a majority stake before that date would have carried heavy tax penalties.

Viacom said that it intends to distribute its Blockbuster stock to Viacom shareholders who tender their Viacom stock in an exchange offer following the IPO. Under an agreement with the underwriters of the offering, Viacom will wait at least 180 days after the IPO before starting the exchange.

Saw it coming

Wall Streeters have been anticipating that Blockbuster would be fully split off sometime early next year.

Viacom announced July 19 that it planned to sell 31 million shares, or 17.7%, of Blockbuster to the public at an estimated price of $16-$18 a share.

Viacom has opted to divest Blockbuster since it doesn’t think the company is properly valued inside a larger entertainment conglomerate. The IPO was made feasible by revenue sharing and other measures that have turned the once-ailing unit into a strong performer with growing market share.

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