Reverse British Invasion: Viacom to Buy U.K.'s Channel 5 for $761 Million

Owner of MTV and Comedy Central Finds New Outlet for Shows

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MTV's 'Awkward.' Viacom is acquiring a younger-skewing channel in the U.K.
MTV's 'Awkward.' Viacom is acquiring a younger-skewing channel in the U.K.

Viacom has agreed to buy the U.K.'s Channel 5 for 450 million pounds ($761 million), giving the owner of MTV and Comedy Central a broader presence in Europe and a chance to create shows for the local market.

Sumner Redstone's company will pay cash to buy the broadcaster from Northern & Shell, the publishing company owned by Richard Desmond. The purchase will immediately boost earnings, according to a statement from New York-based Viacom, which also today reported second-quarter profit that beat analysts' estimates.

Viacom is buying a station -- known for provocative reality-TV shows like "Britain's Crime Capitals" and "Celebrity Big Brother" -- that also airs popular U.S. fare including "CSI New York" and "The Mentalist." Channel 5, with about 42 million viewers in any given month, gives Viacom an opportunity to capitalize on its U.S. programming in Britain and introduce U.K.-created content to global audiences.

"Viacom is more than doubling the size of its business and so this deal stacks up financially," said Tim Westcott, a media analyst at IHS Technology. "It's also good because Viacom has a big program library that's suited to the younger Channel 5 demographic with MTV."

Viacom CEO Philippe Dauman said the deal will result in his company "dramatically" increasing original programing for the U.K. market as well as furthering its international expansion with an English-speaking outlet for its U.S. TV programming.

"We look forward to partnering with local producers to introduce more U.K.-created content to global audiences, and will continue to explore opportunities in the U.K., both in the free-to-air and pay television markets," Mr. Dauman said.

Mr. Desmond initially sought more than 700 million pounds for the station. He also considered an initial public offering instead of selling, people familiar with the plan said. Mr. Desmond, who once owned the license to publish Penthouse in the U.K., bought Channel 5 from Bertelsmann AG's RTL Group SA in 2010 for 103.5 million pounds.

The acquisition will be financed by existing Viacom cash balances, the company said.

Separately today, Viacom said earnings per share for the second quarter totaled $1.08, according to a statement. That compared with the $1.05-a-share average of 27 analysts' estimates. Revenue rose 1.2% to $3.17 billion.

Revenue from Viacom's main business of cable channels advanced 6.4% to $2.38 billion from a year earlier, the company said, citing gains from Comedy Central.

Sales at the Paramount filmed entertainment division fell 12% to $831 million. The studio released the big-screen epic "Noah," featuring Russell Crowe, during the period. The movie has grossed $320.5 million in worldwide ticket sales, according to researcher Box Office Mojo.

Paramount is set to release three big summer films in the coming months, a critical chunk of the studio's 2014 slate. "Transformers: Age of Extinction" featuring Mark Wahlberg opens on June 27, followed by "Hercules" on July 25 and a new "Teenage Mutant Ninja Turtles" release on Aug. 8.

~ Bloomberg News ~

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