Viacom Splits

Less than two months after Clear Channel Communications announced it would shed its live entertainment arm, media giant Viacom has jumped on the de-consolidation bandwagon with the news that it will split into two entities.

In a move that effectively undoes the company’s 1999 acquisition of CBS Corp., Viacom’s board approved a plan to break up the company in a tax-free spinoff to be completed in the first quarter of 2006.

One company, led by Viacom co-president Tom Freston, will retain the Viacom name and ownership of MTV, VH1, BET, Nickelodeon, CMT and other cable networks as well as the Paramount movie studio.

Les Moonves, Viacom’s other co-president, will head the second company, which will be known as CBS Corp. and will include the CBS and UPN networks, Infinity Radio, outdoor advertising, and other radio and television properties.

Moonves and Freston will still report to Viacom CEO Sumner Redstone, who will remain chief shareholder and chairman of the board.

The announcement came a day after the company said it would sell its Canadian movie theatre chain.

By operating as two more focused entities, the company hopes to rekindle investors’ interest and revive its waning stock prices. Investors interested in high-growth businesses will be attracted to MTV Networks, while those interested in a more slow but steady rate of return will buy CBS stock, the company said. The bigger-is-better ethos of companies like Viacom and CCC has begun to lose popularity as investors question the value of keeping a variety of often unrelated businesses under one roof.

In an interview with the Los Angeles Times, Redstone said his company is simply adapting to a new business atmosphere.

“These businesses are different,” he told the paper. “We’ve realized as much of the synergies as we’re going to.”

The 2000 merger with CBS was “a good deal,” Redstone said, “but the world has changed … . The world of the conglomerate has passed.”

He told the paper he expects MTV Networks to continue to grow aggressively with expansion overseas, particularly in China, and said CBS’ outdoor advertising business could potentially grow by “20 percent a year.”