Viacom Inc.’s $2.3 billion purchase of the
black-owned parent of the nation’s biggest cable television channel
aimed at blacks was seen as a sign that Corporate America is waking
up to the value of minority-owned businesses.
But the deal announced Friday for the privately owned BET Holdings II Inc. also raised worries because the black executives who have agreed to stay on to continue running the business will no longer have absolute control.
“There will not be African-American ownership at the very top, and I think that makes a difference,” said James Winston, executive director of Washington-based National Association of Black Owned Broadcasters.
Viacom Inc., the media powerhouse that owns CBS and the MTV and Nickelodeon cable TV channels, is paying about $2.3 billion in stock for BET Holdings and will assume $570 million in debt. It was believed to be one of the biggest buyouts ever of a black-owned business, although the prices for some sales have never been disclosed.
Viacom said it will provide the resources BET needs to continue growing while keeping top managers running the business who know how to reach the black audience. In exchange, it expects to benefit from owning a business widely recognized by a group that is growing faster in numbers and income than the general population.
“Truly great brands don’t become available every day,” Sumner M. Redstone, chairman and chief executive of Viacom, told analysts in a conference call.
A Known Brand
BET, based in Washington, D.C., owns the cable channel Black Entertainment Television as well as a jazz music cable channel, and publishes books, creates radio programming, makes movies and operates an Internet-based service aimed at blacks.
The company ranked sixth in the latest rankings by Black Enterprise magazine of the largest black-owned industrial and service companies in the U.S. with an estimated $225 million in revenue in 1999.
Robert L. Johnson, the cable TV executive who founded Black Entertainment Television in 1979 and owns a 63 percent stake in BET Holdings, will get stock worth more than $1.4 billion in the deal.
Johnson, who has ambitions of starting a regional airline from Washington D.C., has agreed to stay on for at least five years as chairman and chief executive of the operation as will Debra Lee, BET’s president and chief operating officer.
The companies said Friday they hope to complete the deal early next year after getting regulatory approval. BET will remain based in Washington.
Alfred A. Edmond Jr., editor-in-chief of Black Enterprise magazine, said the deal showed “it is possible to build a successful black-owned enterprise and have it fairly valued in the marketplace.”
Ken Smikle, president of Target Market News, a Chicago-based research firm that tracks black business activity, said the deal may inspire other black entrepreneurs and make it easier for them to raise money.
Viacom president Mel Karmazin said Viacom hopes to increase distribution for Black Entertainment Television, which is currently available in about 62.4 million of the estimated 75 million U.S. households with cable television.
He also said BET properties should get a bigger share of the money being spent by advertisers. While blacks represent about 13 percent of the U.S. population, he said only 1 percent of ad spending is going to media that target that group.
In a separate telephone news conference, Johnson said BET can benefit from its association with Viacom in numerous ways:
BET can get help from CBS in expanding its news operations.
Viacom’s experience with making MTV a global brand can help BET gain global distribution for its music channel BET on Jazz.
Viacom’s UPN network shows aimed at blacks may play well on Black Entertainment Television as well.
Asked if he thought BET would suffer a backlash from advertisers or viewers for selling to Viacom, Johnson said he doubted it and that the deal would help BET “better serve the black community.”
He said it was part of the “natural progression” for strong black-owned businesses to align themselves with major media companies.
Johnson recently agreed to start DC Air, a regional airline in Washington with assets being shed by UAL Corp. and US Airways Group to secure regulatory approval of their plan to merge. He said Friday the BET sale would have “almost no bearing on the financing” of the airline deal and said he would find someone experienced in the airline business to run it.
Johnson and Liberty Media Corp., which owns 35 percent of BET and is run by cable TV mogul John Malone, are retaining ownership of some BET assets not included in the sale to Viacom. They include three restaurants in Maryland, Washington, D.C. and Las Vegas and a dance club at Disney World in Florida and a stake in several magazines.
Lee said decisions have not yet been made on what to do with those assets.
In addition to CBS, MTV, Nickelodeon and UPN, Viacom owns the Showtime pay-TV service, the studio Paramount Pictures, radio station and billboard owner Infinity Broadcasting and publisher Simon & Schuster.
On the New York Stock Exchange, Class B shares of Viacom were off 62.5 cents to close at $57.88.