Wall Street ecstatic as Eye set to reap fresh cash
CBS shares headed skyward Thursday skipping way past their 52-week high as Wall Street applauded plans to unload the outdoor advertising business. And it’s not just any old sale. The media company is converting the more profitable Americas piece of the biz into a high-yield vehicle called a REIT. Real estate investment trusts are required to pass on at least 90% of their profits to investors.In notes Thursday morning, Bernstein Research analyst Todd Juenger slapped another $4 per share onto the value of outdoor, raising his price target for CBS to $43. Mike Morris from Davenport raised his target by $3 to $45. CBS shares had surged by more than 10% in early trading to about $41.78 and closed Thursday at $40.95. As part of the divestiture, the European and Asian billboard assets will be sold outright. The move, announced Wednesday after market close, will line CBS coffers with big bucks from the sale of the REIT and/or ongoing dividends from it. And it simplifies the company by splitting off a business that’s outside core broadcast and cable assets. CEO Leslie Moonves “has been transforming CBS to be more a content company. The outdoor business is a good cash flow business but not a strategic asset,” wrote Evercore’s Alan Gould. Michael Nathanson of Nomura said the prospect that CBS would use the extra cash to buy back more stock could lead to a theoretical price target as high as $48. The company could also spend the new coin to acquire a cable network or independent TV studio. Morris values the enterprise value of the outdoor business (what it could be worth in a sale) at $6.57 billion — $6 billion domestic and $500 million in Europe/Asia. He and others don’t exclude an outright sale of the Americas assets as well as the REIT process requires IRS approval and isn’t likely to close until 2014.