Sumner talks acquisitions; Moody's talks downgrade

It's been a good, long while since Viacom has made a major acquisition. Think back to BET, a $3 billion transaction that closed four years ago. But now CEO Sumner Redstone is hinting that he want to buy again. He told a Smith Barney conference this week in Phoenix that he's looking at such high-growth industries as video games, cable and, of course, the Internet. Such acquisitions, along with pumping up Viacom's Infinity Broadcasting and Paramount Pictures units, would help to get Viacom back to the 15-16% annual growth that the company used to achieve with regularity.

On thing that Viacom won't be buying, though, is Sirius Satellite Radio, despite the rumors that intensified when former Viacom President Mel Karmazin became CEO of the satellite radio company. "We're not going to be buying Sirius," Viacom Co-President/COO Les Moonves stated bluntly at the Phoenix confab.

Redstone also said that if Viacom's stock price doesn't move up under the $8 billion stock buyback now underway, the company might just free up more cash to buy back more stock. And, he said, he might do that even if it meant a drop in Viacom's credit ratings.

It looks like Moody's Investors Service stands ready to oblige. It's placed Viacom's debt ratings under review for possible downgrade. "The review follows the chairman's public comments that the company is scrutinizing its commitment to maintain an A3 rating and is considering returning capital to shareholders via additional debt leverage. This announcement comes on the heels of management's decision late last year to increase its share repurchase program to $8.0 billion of which approximately $2.0 billion has already been purchased," Moody's said.

Ratings placed under review include the following:

Senior unsecured notes and debentures - A3

Senior unsecured bank credit facility - A3

Commercial Paper - Prime-2

Senior unsecured shelf - (P)A3

Senior subordinate shelf - (P)Baa1

Preferred shelf - (P)Baa2

CBS Corporation senior unsecured ratings - A3

CBS Broadcasting Inc. senior unsecured ratings - A3

Westinghouse Credit Corporation senior unsecured ratings - A3

RBR observation:
Open mouth, remove foot. Did Sumner not realize that the credit raters would be listening to such comments? And on another matter, we find it interesting that while Redstone continues to complain that Viacom's stock is undervalued, he's been selling some of his own stake back to the company under the buyback plan - - more than 200 million bucks worth so far. Of course, he's been selling back non-voting Class B stock, not any of the Class A stock, through which the Redstone family's National Amusements holds voting control of Viacom.