Viacom has recently received interest from several buyers regarding its stocks in Paramount. This was uncharacteristic for the giant media and entertainment outfit since it has fought relentlessly for its efficient formula of cutting costs by making less movies and outsourcing its key functions.
With increasing pressure from investors who are disappointed with its slumping stock price, Viacom is set to sell a minority stake in the Paramount film studio. Investors are hoping to see that this major strategic move will help close a deal for the studio which is now running to about 104 years old by the end of June.
Faced with an ineffective advertising coupled with poor cable network ratings, the media company's investors have been pushing for the sale of all or part of the film studio. There are possible buyers that include Chinese firms and tech companies which are looking to create original content.
According to Todd Juenger, a Sanford Bernstein analyst, the entire Paramount studio is worth $4 billion. Viacom says it is now undergoing a rebuilding process after a series of high-profile failures. The media company did not reveal the percentage of the studio it will sell.
The initiative was unanimously approved by the board in order to launch the formal process of selling part of the studio after it was recommended by Philippe Dauman, Chief Executive. This is Dauman's first major project since assuming the post as executive chairman in early February.
Paramount is still hoping for a comeback under the leadership of Brad Grey, CEO of the studio. He wants to increase film production to 15 movies up from 11 during the last fiscal year. Grey is also refurbishing a startup TV production unit.
"The market didn't historically view Viacom as willing to pursue value-creating opportunities like selling stakes in existing assets," John Janedis, an analyst at Jefferies, said in an interview. "This is a clear change in tone," he added.
