Viacom should sell its Paramount Pictures movie studio to Time Warner.
At least that’s what analyst agitator Richard Greenfield of Pali Capital thinks.
Selling the Brad Grey-led studio is just one of Greenfield’s recommendations in a scathing new report outlining ways for the media giant to boost its wilting stock price, which is down 43 percent this year.
“Paramount has become [Viacom Chairman] Sumner Redstone’s ‘sports team,’ in the sense that its annual cash flow drives a valuation that is well below its private-market value,” Greenfield wrote.
Pegging Paramount’s sticker price at between $4 billion and $5 billion, Greenfield added that Time Warner could be an interested buyer because it “will have significant cash at year-end and has clearly stated its desire to expand its content business.”
But Redstone is not likely to take Greenfield up on his suggestion. After all, Paramount is not just the patriarch’s sports team. It’s his baby.
The Paramount deal, which involved a brutal five-month bidding war against Barry Diller 14 years ago, instantly transformed Redstone into a Hollywood player, and he considers the nearly $10 billion he spent on it worth every penny.
And it appears he’s not the only one who doesn’t agree with Greenfield.
“The technological change inherent in the advent of Blu-Ray DVDs and digital cinema, which will radically lower print and distribution costs, suggests that you don’t want to be selling any studio operations,” said Caris & Co. analyst David Miller.
Greenfield also took CEO Philippe Dauman and the rest of Viacom’s management to task for being invisible to analysts and investors.
“Investors increasingly loathe Viacom due to a nearly nonexistent management team, with no access to anyone involved in operations, who have done a poor job explaining why they are underperforming peers,” wrote Greenfield.
Despite the vitriol, Greenfield has a “buy” rating on Viacom’s stock, albeit with a price target reduction to $40 per share from $51. Yesterday, shares fell 90 cents, or 3.6 percent to $24.11.
Noting the irony in Greenfield’s claim that he likes the stock while simultaneously trashing its management and strategy, a Viacom spokesman said, “There’s a lack of serious analysis [in his reports]. He’s become the Jerry Springer of financial analysts.”