ViacomCBS to Sell CBS Studio Center for $1.85B

Multinational mass media and entertainment conglomerate ViacomCBS Inc. (VIAC) recently announced that it will sell CBS Studio Center and its associated operating business to a partnership formed by Hackman Capital Partners, LLC and Square Mile Capital Management, LLC for roughly $1.85 billion. The deal is likely to close in 2021.

Following the news, shares of the company declined 4.1% on Tuesday. The stock, however, pared its losses completely to close at $34.88 in the extended trading session.

The property, which consists of over 1 million square feet of space, includes 22 stages, a production office and support buildings, third-party tenant offices, a purpose-built broadcast center and filmable backlot locations.

Upon completion of the deal, ViacomCBS will enter into a short-term lease-back of certain portions of the property to manage the transition of ViacomCBS employees to other locations.

Management Commentary

The VP and Chief Financial Officer of ViacomCBS, Naveen Chopra, said, “This sale is part of an ongoing optimization of ViacomCBS’ real estate and operations portfolio and will allow the company to re-deploy capital to strategic growth priorities, including streaming.”

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Price Target

Recently, Bank of America Securities analyst Jessica Reif Cohen reiterated a Buy rating on the stock with a price target of $53, which implies upside potential of 71.2% from current levels.

The analyst said, “VIAC is poised to drive significant net adds in 2022 aided by their recently announced T-Mobile deal, Sky distribution agreement and SkyShowtime JV along with upcoming launches in several other international markets. We believe these distribution deals will enable VIAC to achieve scale more rapidly and we would not be surprised to see more of these announcements in the coming months. The company has a deep breadth of content that have a broad appeal and expands the potential TAM for their streaming service.”

The Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 5 Buys, 5 Holds and 1 Sell. The average ViacomCBS price target of $48.82 implies that the stock has upside potential of 57.7% from current levels. Shares have declined 10.8% over the past year.