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Viacom may sell 'significant' minority stake in Paramount Pictures

Roger Yu
USA TODAY
Hansel (Owen Wilson, left), Derek (Ben Stiller) and Valentina (Penelope Cruz) join forces in "Zoolander 2."

Viacom said Tuesday it may sell a “significant” minority stake in Paramount Pictures, seeking to raise cash amid volatility in its cable TV business and responding to shareholder calls to unload its holdings in the film unit.

"We have received indications of interest from potential partners seeking a strategic investment in Paramount Pictures, and I have decided to pursue discussions with a select group of potential investors," said Viacom Chairman and CEO Philippe Dauman in a statement.

Shares of Viacom edged up 0.4% to close at $37.01 on Tuesday.

“In this time of change and enormous opportunity in our industry, a partnership will bring significant benefit to Paramount and Viacom, both strategically and financially, provide new opportunities for Paramount's employees and talent," he said. "The value of motion picture content continues to increase with the explosion of screens and the rapid expansion of the global theatrical market."

Revealing his intention to sell a stake in Paramount is Dauman's first strategic move since he was elevated to board chairmanship earlier this month. Facing pressure from investors to clarify its succession plans, Viacom, whose businesses also include MTV, Nickelodeon and Comedy Channel, said on Feb. 4 that the ailing Sumner Redstone, 92 — who has controlled the company for decades — renounced his position as board chairman to become chairman emeritus.

Meanwhile, calls for Viacom's management to streamline its businesses have been getting louder in recent months. In December, Viacom's second-largest shareholder, Mario Gabelli, whose investment firm owns about 10% of Viacom, urged Viacom to consider selling Paramount Pictures to Alibaba, the Chinese e-commerce giant controlled by billionaire Jack Ma. Ma's involvement would help Paramount navigate the Chinese market, Gabelli said.

Joining hands with a strategic partner would open doors for Viacom in "new distribution, possibly in untapped markets," wrote John Janedis, an analyst at Jefferies, in a note to investors. "Despite Paramount's robust film pipeline, the asset has been relatively under-appreciated by investors."

Changing technology and consumer behavior have upended the business models of Viacom and other cable TV and film studio operators. More TV viewers are watching streaming video online and cutting their cable subscriptions. The film industry is similarly seeing threats from fans who opt to wait until movies are released online and more video entertainment options being available to consumers in general.

Earlier this month, Viacom's media networks unit, which operates its cable channels, reported a 3% revenue decline to $2.57 billion for the fiscal first quarter, citing lower advertising sales.

Revenue for the film unit, which runs Paramount, fell 15% to $612 million as the year-ago quarter had more box-office hits.

Follow USA TODAY reporter Roger Yu on Twitter @RogerYu_.

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