In a move to unlock value for shareholders, CBS (NYSE:CBS) announced Jan. 16 that it was splitting off its Americas outdoor advertising business into a real-estate investment trust (REIT); secondarily it will attempt to sell its European and Asian outdoor businesses. In the works for many months, CBS hopes to make it all come together by early 2014. What does this mean for shareholders?

SEE: Exploring Real Estate Investments

Adding Value
It's hard to imagine a publicly traded media company that's delivered more value to shareholders in the past five years than CBS. Yet here we sit with CBS undertaking a very complicated and lengthy process that will focus the company on content creation, which is the lifeblood of its business. CEO Les Moonves has been unequivocal in his assertion that its outdoor business wasn't a segment it was interested in building and barring unforeseen circumstances, it will become stronger in the next 12 months through addition by subtraction.

CBS and Peer Group - Total Return 2007-2012


Cumulative Total Return



Walt Disney (NYSE:DIS)


News Corp. (Nasdaq:NWSA)


Time Warner (NYSE:TWX)


Cumulus Media (Nasdaq:CMLS)


Clear Channel Outdoor Holdings (NYSE:CCO)


What's the Outdoor Business Worth?
RBC Capital Markets analyst David Bank values CBS' global outdoor business at $5 billion to $6 billion. Others suggest as much as $8 billion, but that would be a big stretch for a business that's barely growing. By putting in motion this two-step process, however, CBS tells potential buyers interested in its entire outdoor business that it expects serious offers only. It also said that it's prepared to split the outdoor business into two pieces to maximize shareholder value. For the first nine months ending September 30, 2012, the outdoor business generated just 12.7% of revenue and even less operating income before depreciation and amortization at 8.8%. Only its Simon & Schuster publishing business does less. It's very likely that the publishing arm also could be sold in the next 12 months. Between the two, investors can expect at least $6 billion from the process and likely more.

SEE: Analyzing Show Biz Stocks

Where Will Proceeds Go?
Moonves is on record as having an interest in Sony Pictures should Sony (NYSE:SNE) decide to put its film and television up for sale. One estimate I've seen puts the value at $7.6 billion, which definitely makes the acquisition possible. If you consider CBS' profits on a segment basis, however, the real drivers of growth are its cable networks - Showtime, CBS Sports Network and Smithsonian Networks - which weren't even broken out in its financial reports until 2010. I'd be more tempted to go out and get other popular cable network(s) such as HGTV and Food Network, both owned by Scripps Networks Interactive (NYSE:SNI), or even a slightly smaller acquisition such as AMC Networks (Nasdaq:AMCX). After all, that's where the TV business is headed.

Stock Price
Whatever happens in the next 12-18 months, it's clear that analysts are upbeat about the news that CBS is selling off its outdoor business. No less than five analysts covering its stock either reiterated their "buy" ratings or upped their target price for the next 12 months based on these developments. CBS is now trading above $40 for the first time in its seven-year run as a public company. It will be hard-pressed to reach $50 in 2013, but once the REIT gets done in 2014, I don't see why it wouldn't move quickly to $60. Especially if it makes an acquisition investors are happy about.

SEE: 5 Quick Research Tips For Busy Investors

The Bottom Line
Moonves appears to have CBS firing on all cylinders at the moment. Imagine what would happen if the economy was actually growing by more than 2% or 3% of GDP. Focusing on its core business, I don't see why the good times can't continue indefinitely.

At the time of writing, Will Ashworth did not own any shares in any company mentioned in this article.

Related Articles
  1. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  2. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  3. Investing

    Playing The Decline of Traditional Broadcast Media

    Broadcast media is losing viewership as cord cutting by the younger generation triggers subscription losses at cable and satellite companies.
  4. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  5. Wealth Management

    Importance of Title in Art Transactions

    A work of art can be a valuable investment, but it’s important to verify that it isn’t stolen property when you purchase it.
  6. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  7. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  8. Investing News

    How AT&T Evolved into a Mobile Phone Giant

    A third of Americans use an AT&T mobile phone. How did it evolve from a state-sponsored monopoly, though antitrust and a technological revolution?
  9. Stock Analysis

    Home Depot: Can its Shares Continue Climbing?

    Home Depot has outperformed the market by a wide margin in the last 12 months. Is this sustainable?
  10. Stock Analysis

    Yelp: Can it Regain its Losses in 2016? (YELP)

    Yelp investors have had reason to be happy recently. Will the good spirits last?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center