Media giant CBS Corporation (CBS) declared the final exchange terms in connection with its divestiture of CBS Outdoor Americas Inc. (CBSO). Per the terms of exchange, for each CBS Class B share accepted in the deal, 2.1689 shares of CBS Outdoor stock will be swapped.
Also, according to Wells Fargo Bank, N.A., the exchange agent, approximately 304.1 million CBS Class B shares were tendered before the exchange offer was terminated. This included roughly 100.2 million shares that were tendered validly, but not withdrawn validly and 203.9 shares, which were tendered by notice of assured delivery. Of these 304.1 million shares, CBS accepted nearly 44.7 million of the tendered stock in exchange for 97 million CBS Outdoor shares held by CBS.
The company anticipates declaring the final proration factor accurately after the termination of the guarantee delivery period, which is expected on Jul 14, 2014. Following the final announcement, the tendered CBS Class B shares, which are unaccepted for exchange, will be given back to the tendering stockholders.
CBS recently announced that it will divest its entire 81% stake in the spun-off billboard business CBS Outdoors through an exchange offer. This was a move made by the company to inch closer to its plans of converting its subsidiary CBS Outdoor into a Real Estate Investment Trust (REIT).
The offer is expected to be tax free for participating shareholders in the U.S. and is likely to be the final step toward the separation of CBS Outdoor, which began trading as a separate entity in March earlier this year. CBS has 97 million shares of the Outdoors unit.
CBS Outdoor had concluded an Initial Public Offering (IPO) of 19% of its stake in April 2014. After eliminating underwriting discounts and commissions, the net proceeds from the IPO came in at $615 million. CBS Outdoor will use the net proceeds to pay CBS for its contribution, and use the remaining amount to pay shareholders in correlation with the conversion into a REIT.
Conversion into an REIT is important from the taxation viewpoint as REITs enjoy tax benefits, given the norm of paying 90% of its income as dividends to shareholders. As per CBS Outdoors., the conversion will help maximize shareholder wealth.
For CBS, which competes with Lions Gate Entertainment Corp. (LGF) and The Walt Disney Company (DIS), the split will allow more focus on its primary operations i.e. developing, producing and distributing finest quality content across all platforms on a worldwide basis.
CBS currently carries a Zacks Rank #3 (Hold).
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