Viacom

Media | United States

Investment: Long
Status: Exited (Q1 2021)

Summary

In February 2018, we disclose an investment in Viacom Inc. (“Viacom”). The media industry is in the midst of structural change. Distribution models are shifting, new entrants are bidding aggressively for content, and scale has become a strategic necessity. In this environment, companies with trusted brands and global reach are positioned to matter more, not less. Viacom is one of them.

Viacom owns a portfolio of enduring franchises with global distribution and lasting relevance. Yet the market prices the company as if it is in terminal decline, giving little credit to the strength of these assets or the strategic options they create.

At today’s levels, Viacom trades at a steep discount to peers and to the multiples commanded in recent sector transactions. The equity is priced as if the business is dying, while the economics of its franchises and the scarcity of its library argue the opposite. In any rational repricing, whether by improved capital allocation or by strategic combination, the shares should command materially higher value.

Our thesis is straightforward: change in the sector is inevitable, and Viacom is too important to be left behind. Competitive pressures make it a natural participant in industry realignment, and the company is already beginning to streamline operations and address its balance sheet. Whether through disciplined capital allocation and operational focus, or through strategic combinations, we expect the gap between market price and intrinsic value to narrow materially.

We exited our investment in March 2021.

(This thesis is archived and reflects our views at the time of publication.)

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