Viacom made good on its threat to take Infinity Broadcasting private again, announcing plans Tuesday to purchase the chunk of the radio and outdoor advertising giant it doesn’t already own for about $15 billion in stock.
Viacom now holds 64% of Infinity, which CEO Mel Karmazin spun off to the public in late 1998 when the company was a unit of free-standing CBS. Viacom and CBS merged in May, and Karmazin has complained that the market wasn’t valuing Infinity properly, given its lucrative and fast-growing assets. Viacom holds about 90% of the voting power of Infinity’s Class A and B stock.
“While the Infinity IPO has been extraordinarily successful, we believe that Infinity stockholders can realize even greater value through Viacom’s offer,” Karmazin said, adding the deal provides “a significant premium on a tax-free basis” and “enables Infinity shareholders to participate in the extraordinary opportunity created by Infinity’s full integration” with Viacom.
Viacom is offering Infinity holders 0.546 of a Viacom share for each Infinity share they own. Based on Viacom’s $71 closing price Monday , the company said the offer comes to about $40.04 per Infinity share. That would be a 13.6% premium to Infinity’s close the same day. If Viacom’s shares slip, the value for Infinity holders would shift accordingly.
The combined Viacom-CBS has been one of Wall Street’s favorites, but the Street hasn’t been overly pleased with the company for ceding the Chris-Craft station group to rival News Corp. Those two companies announced their merger Monday after Viacom and Chris-Craft broke off talks based on price.
“Combining Infinity with Viacom will now create a company that is financially even stronger and strategically even better positioned to generate superior returns to shareholders,” said Viacom chairman Sumner Redstone.
The buyout proposal is subject to approval of Infinity’s independent directors. Infinity’s board said it has formed a special committee of independent directors, Bruce Gordon and Jeffrey Sherman, to review the proposal with the help of outside legal counsel and financial advisers.
Infinity owns and operates 166 radio stations and is the largest outdoor advertising company in North America.