Viacom Inc. (VIAB - Free Report) recently announced that it has entered into an agreement with Telefonica S.A (TEF - Free Report) to acquire Television Federal S.A. (Telefe). The acquisition will be made by the company’s Viacom International Media Networks (“VIMN”) division and is expected to be value accretive for the company by boosting its presence in Argentina. Telefe is a popular free-to-air channel in the country and is expected to strengthen Viacom’s pay TV networks, which includes popular household names like MTV, Nickelodeon, Comedy Central and Paramount Channel.
Terms of the Deal
The deal has been valued at approximately $345 million and is likely to be accretive to Viacom’s fiscal 2017 earnings. Viacom recently reported its fourth-quarter and fiscal 2016 results. The deal will be financed using the company’s cash balance and is subject to customary regulatory approvals and closing conditions.
Per the deal, Viacom will takeover the entire portfolio of Telefe’s brands and assets. This includes Telefe in Buenos Aires Capital and Gran Buenos Aires(a leading free-to-air network), eight wholly owned channels in the country’s interiors, pay channel called Telefe International which has viewers in over 17 countries, and a host of applications such as Mi Telefe (My Telefe) and Telefe Noticias (Telefe News) in addition to multi-channel network UPlay. The deal also includes an e-commerce partnership with Mecado Libre, twelve production studios, and a library comprising over 33,000 hours of content available in more than 100 countries. Telefe is expected to be headed by Pierluigi Gazzolo, President of VIMN Americas.
Benefit for Both Companies
The deal is expected to be beneficial for both Viacom and Telefonica. Viacom expects to successfully integrate Telefe within its vast global network and capitalize on the channel’s market leading status. Moreover, the deal complements Viacom’s growth and expansion strategy in Argentina and Latin America.
Telefonica, on the other hand, believes that the deal is in line with its asset portfolio management strategy. Post this deal, Telefonica plans to focus on its main activity in Argentina, which is centered on telecommunication sector and connectivity technology development.
After a lackluster fiscal fourth quarter performance, Zacks Rank #3 (Hold) company is striving to improve its performance as indicated by its deal with Telefonica. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Although the company faces tough competition from peers like Discovery Communications Inc. (DISCA - Free Report) and Times Warner Inc. , we are positive on its move to strengthen its international portfolio through this acquisition.
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