CBS To Divest Stake In CBS Outdoor - Analyst Blog

CBS Corporation CBS inched closer to its plans of converting its subsidiary CBS Outdoor Americas Inc. CBSO into a Real Estate Investment Trust (REIT). The company announced that it will divest its entire 81% stake in CBS Outdoors through an exchange offer. Shares of CBS Corp. rose 1.2% whereas shares of the CBS Outdoors fell 2.2% following the news.

The offer is expected to be tax free for participating shareholders in the U.S. and is likely to be the final step toward the separation of CBS Outdoor which began trading as a separate entity in March earlier this year. As per the offer, CBS Corp shareholders can exchange all, some or none of their shares for CBS Outdoor shares at a 7% discount. CBS Corp has 97 million shares of the Outdoors unit.

Also, CBS Outdoor had concluded an initial public Offering IPO of 19% of its stake in April 2014. After eliminating underwriting discounts and commissions, the net proceeds from the IPO came in at $615 million. CBS Outdoor will use the net proceeds to pay CBS Corp. for its contribution, and use the remaining amount to pay shareholders in correlation with the conversion into a REIT.

Conversion into a REIT is important from the taxation viewpoint as REITs enjoy tax benefits given the norm of paying 90% of its income as dividends to shareholders. As per CBS Outdoors., the conversion will help maximize shareholder wealth.

For CBS Corp. which competes with Lions Gate Entertainment Corp. LGF and The Walt Disney Co. DIS, the split will allow more focus on its primary operations i.e. developing, producing and distributing finest quality content across all platforms on a worldwide level.

CBS Outdoors America is a leading out-of-home media company with significant presence in the United States, Canada, Mexico and South America.

CBS Corp carries a Zacks Rank #3 (Hold).

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