Blockbuster Video and Viacom have decided to renew their marriage vows.
Ending speculation sparked by a 60% hike in Blockbuster’s stock price since the beginning of the year, Blockbuster chairman and CEO John Antioco confirmed Wednesday that Viacom has decided to hold onto its 82% stake in the vidtailer. Viacom will not pursue a secondary stock offering that would have severed ties between the companies, he said.
Viacom spun off the first 18% of Blockbuster shares to the public in August 1999 and said then it planned to divest the rest of its stake when the stock price got high enough.
Change of heart
That took some time. But now Viacom apparently likes the business so much it wants to keep it inhouse. “The company no longer has any plans for the split off of Blockbuster,” it said in an SEC filing Wednesday.
Blockbuster’s shares ended 2000 trading at $8.37 but had traded as high as $15.10 in late February, besting the initial offering price of $15 a share.
On Wednesday, the stock rose 5% to $13.98.
“Now was the time to do it,” said Antioco. “I asked Mel and Sumner about it and I think that caused them to focus on it,” he added, referring to prexy-chief operating officer Mel Karmazin and chairman-CEO Sumner Redstone. They saw “a growing business with good strong cash flow.”
Antioco said he did not anticipate any changes in Blockbuster’s strategic plans as a result of the decision to scuttle the spinoff.
“We’re going to continue to focus on our core business and on making prudent investments in new technologies,” he said.
This month, Blockbuster and Enron Broadband Services canceled their 20-year deal to develop a Blockbuster branded video-on-demand service over Enron’s fiber-optic networks.
While the loss of that deal was seen as a setback to Blockbuster’s VOD plans, its share price was relatively unaffected by the split.
“No one had really given us any stock value when we made the deal with Enron, so we didn’t really lose any value when it ended,” Antioco said.