Does this mean that CBS will get over 3B in cash to use for additional content investments?
Les Moonves mentioned during the CBSO IPO that CBS will Focus on its core of creating content. Below is taken from today's ER Press release. It essentially indicates that it will divest it 81% ownership. Does this mean that they will sell it to investors? Using the IPO valuation 23M/.19=121M total shares x .81=98M shares owned by CBS x $28 IPO price = $2.7B or $3B usining today's value $30.48. What will CBS do with the cash? Will they return it to shareholders in the form of dividends or more buybacks? Will they make any asset purchases or expand production at their own studio operations?
CBS Outdoor Americas Inc.
During the quarter, CBS Outdoor borrowed $1.6 billion through an $800 million senior secured term loan credit facility and the issuance of $800 million of senior notes. In April 2014, CBS Outdoor completed an initial public offering ("IPO") of 23 million shares of its common stock for $28.00 per share, resulting in total net proceeds of $615 million after deducting underwriting discounts and commissions. After the closing of the IPO, the Company owned 81% of CBS Outdoor, which it plans to divest through a tax-free split-off in 2014, subject to market conditions and customary approvals. Also in April, the Company announced that it had received a favorable private letter ruling from the Internal Revenue Service with respect to the Company's plan for CBS Outdoor to convert to a real estate investment trust ("REIT"). Following the split-off, CBS Outdoor intends to elect and qualify to be taxed as a REIT for U.S. federal income tax purposes.
This is how CBS will get their cash out of CBS Outdoors:
David W. Miller - Topeka Capital Markets Inc., Research Division
A question for Les and a question for Joe. Joe, I'll start with you. Let's just say, for sake of argument, that when you guys do your share exchange between CBS parent and Outdoor Americas that the demand is weaker than you expected or just not there just given market dynamics or whatever the reason. What would be your inclination then to dispose of the remaining 83%? Would it be kind of a series of bought deals or just a secondary offering? Any color around that would be great.
Joseph R. Ianniello - Principal Financial Officer and Chief Operating Officer
And, David, it's Joe. On the split, the first thing I'd say, we're going to price it for success. So I don't think we plan on having a failed exchange. But in the unlikely event that we don't get all the shares in, we certainly can do a follow-on. We can also do a follow-up pro rata spin-off. So again, I think we have a couple of backup alternatives to make sure we get our ownership down to 0, which was part of the ruling that we received from the IRS.
This is a quote from Les on March 28, the day of CBSO IPO:
as we analyzed the strategy and at our core we're a content company, you know, and cbs outdoor is a wonderful company, but really didn't fit into the future growth, so when you look at it, the idea of splitting off the outdoor division, it was a positive for the outdoor group plus a positive for cbs because it gives us more cash and gives us more ability to continue to expand in the content business.
CBS seems to be swimming in cash as they just spent 2B buying back their stock
Repurchase of Company Stock
During the first quarter of 2014, the Company spent $2.0 billion to repurchase 31.4 million shares of CBS Corp. Class B Common Stock, of which 4.9 million were delivered at the conclusion of an accelerated share repurchase in April 2014. At March 31, 2014, the Company had $3.43 billion of authorization remaining on its share repurchase program.