N E W Y O R K, Oct 4, 2000 -- 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 BETHoldings II Inc. also raised worries because the black executiveswho have agreed to stay on to continue running the business will nolonger 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 ofBlack Owned Broadcasters.
Viacom Inc., the media powerhouse that owns CBS and the MTV andNickelodeon cable TV channels, is paying about $2.3 billion instock for BET Holdings and will assume $570 million in debt. It wasbelieved to be one of the biggest buyouts ever of a black-ownedbusiness, although the prices for some sales have never beendisclosed.
Viacom said it will provide the resources BET needs to continuegrowing while keeping top managers running the business who knowhow to reach the black audience. In exchange, it expects to benefitfrom owning a business widely recognized by a group that is growingfaster in numbers and income than the general population.
“Truly great brands don’t become available every day,” SumnerM. Redstone, chairman and chief executive of Viacom, told analystsin a conference call.
A Known Brand
BET, based in Washington, D.C., owns the cable channel BlackEntertainment Television as well as a jazz music cable channel, andpublishes books, creates radio programming, makes movies andoperates an Internet-based service aimed at blacks.
The company ranked sixth in the latest rankings by BlackEnterprise magazine of the largest black-owned industrial andservice companies in the U.S. with an estimated $225 million inrevenue in 1999.
Robert L. Johnson, the cable TV executive who founded BlackEntertainment Television in 1979 and owns a 63 percent stake in BETHoldings, will get stock worth more than $1.4 billion in the deal.
Johnson, who has ambitions of starting a regional airline fromWashington D.C., has agreed to stay on for at least five years aschairman 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 earlynext year after getting regulatory approval. BET will remain basedin Washington.
Alfred A. Edmond Jr., editor-in-chief of Black Enterprisemagazine, said the deal showed “it is possible to build asuccessful black-owned enterprise and have it fairly valued in themarketplace.”
Ken Smikle, president of Target Market News, a Chicago-basedresearch firm that tracks black business activity, said the dealmay inspire other black entrepreneurs and make it easier for themto raise money.
Viacom president Mel Karmazin said Viacom hopes to increasedistribution for Black Entertainment Television, which is currentlyavailable 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 themoney being spent by advertisers. While blacks represent about 13percent of the U.S. population, he said only 1 percent of adspending is going to media that target that group.
In a separate telephone news conference, Johnson said BET canbenefit 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 BETgain global distribution for its music channel BET on Jazz.
Viacom’s UPN network shows aimed at blacks may play well onBlack Entertainment Television as well.
Asked if he thought BET would suffer a backlash from advertisersor viewers for selling to Viacom, Johnson said he doubted it andthat the deal would help BET “better serve the black community.”
He said it was part of the “natural progression” for strongblack-owned businesses to align themselves with major mediacompanies.
Johnson recently agreed to start DC Air, a regional airline inWashington with assets being shed by UAL Corp. and US Airways Groupto secure regulatory approval of their plan to merge. He saidFriday the BET sale would have “almost no bearing on thefinancing” of the airline deal and said he would find someoneexperienced in the airline business to run it.
Johnson and Liberty Media Corp., which owns 35 percent of BETand is run by cable TV mogul John Malone, are retaining ownershipof some BET assets not included in the sale to Viacom. They includethree restaurants in Maryland, Washington, D.C. and Las Vegas and adance club at Disney World in Florida and a stake in severalmagazines.
Lee said decisions have not yet been made on what to do withthose assets.
In addition to CBS, MTV, Nickelodeon and UPN, Viacom owns theShowtime pay-TV service, the studio Paramount Pictures, radiostation and billboard owner Infinity Broadcasting and publisherSimon & Schuster.
On the New York Stock Exchange, Class B shares of Viacom wereoff 62.5 cents to close at $57.88.