Viacom to Sell 2 Cable Systems to Cablevision

NEW YORK —  Viacom Inc., a diversified television company with interests ranging from MTV to “The Cosby Show,” said Tuesday that it would sell two major cable systems and a 5% stake in its Showtime/Movie Channel unit for $575 million to reduce its heavy debt load.

Viacom said it was selling the systems in Cleveland and Long Island, N.Y., and a stake in the movie channels to Cablevision Systems Corp. of Woodbury, N.Y., only because it wanted the cash. Viacom has been deeply in debt since its takeover last year by investor Sumner M. Redstone.

“The Cleveland and Long Island cable systems are strong, valuable and superbly managed properties, which we are selling only because the resulting reduction of our debt will lead to growth and flexibility of Viacom,” the company said in a written statement.

The deal is subject to regulatory approval.

The cable systems are being sold for $550 million, a high $2,750 per subscriber, while the movie division stake is being sold for $25 million. The division operates two premium movie services, Movie Channel and Showtime, as well as some smaller pay-per-view premium services.

High Valuation

According to Paul Kagan Associates, a media research firm, the cable price is the second highest per subscriber this year. It compares to an average price of $2,294 per subscriber paid last year.

Viacom President Frank Biondi Jr. said in an interview that the company is looking to sell from 25% to 50% of Showtime.

“We are aiming to sell stakes to four or five companies,” Biondi said.

The deal with Cablevision values the Showtime division at $500 million, higher than the estimated price by industry analysts.

“Our hope is to do it (sell other interests) at those levels and that’s what we’ve been talking to other people about,” Biondi said. He said talks with Tele-Communications Inc., the nation’s largest cable operator, have been in progress for about a year.

Viacom is one of the programming powerhouses in cable television, in addition to being a major syndicator of programs to broadcast stations. It was taken over by Redstone’s holding company, National Amusements Inc., last year for $3.4 billion but had to take on $2.5 billion in debt to finance the package.

Viacom stock closed up a strong $2 at $28 a share, while Cablevision was up 25 cents at $33.50. Both are traded on the American Stock Exchange.

Retains Some Systems

The deal also gives Cablevision Systems a reach of more than 1.3 million subscribers, making it the eighth largest in the nation, according to Kagan Associates. It was previously ranked 11th. Viacom will still have cable systems with 940,000 subscribers, putting it 14th in the nation, down from ninth, according to Kagan.

Biondi said the sale of equity stakes to cable-television operators would help increase Showtime and Movie Channel’s penetration. They compete with Home Box Office and Cinemax, owned by Time Inc.

Viacom also owns MTV and VH-1, the leaders for music videos, and the Nickelodeon children’s programming cable channel.

In broadcast television its properties include syndication rights for “The Cosby Show,” reckoned to be one of the most valuable syndication opportunities in television.