Stock Spinoffs

A Better Life Outdoors? CBS Has New Plans For Its Outdoor Segments

After failing to secure a buyer for the unit, CBS Corporation (CBS) announced that it had some new plans for its outdoor segments. The company plans on converting its Americas Outdoor unit into a REIT while the Asian & European Outdoor piece will be divested and treated as a discontinued operation. The Outdoor segment, which is focused on outdoor advertising (billboards, transit advertising etc.), generated ~$1.9b in sales, but just $107m of pre-tax operating profit in 2011.

Given their preferential tax treatment and high yields, REITs have become a pretty hot space recently and CBS President & CEO Leslie Moonves believes the move “will achieve significant value for our shareholders.” The markets seemed to agree as CBS popped over 8% on the announcement. The company will seek a ruling from the IRS in the first quarter of this year and hopes to complete the conversion in the 2014 tax year. It will be interesting to see how this plays out, given the company doesn’t fit the typical REIT background.

So…why bring this situation up on this site? I am sure the answer will come as a big surprise, but many believe that upon successfully converting the Americas Outdoor segment into a REIT, CBS would then spin it off into a separate company. Nothing is guaranteed though and the company could very likely still be pursuing a sale of the unit. The price would be steep though as Mr. Moonves was reportedly seeking ~$6B for the unit. This WSJ piece suggests that the seemingly ‘crazy’ price tag might not be all that nuts.

We will keep you updated as this situation progresses.

Disclosure: Author holds no position in any stock mentioned.

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