Shares of CBS Corp. (CBS: Quote,CBS-A: Quote) gained eight percent in extended session on Wednesday, after the media company said it has begun the process of converting its outdoor billboard-advertising business in the Americas into a real estate investment trust, in a bid to enhance shareholder value.
CBS also said it will pursue a divestiture of its outdoor-advertising operations in Europe and Asia, and this business will be presented as a discontinued operation as of December 31, 2012.
“We believe the moves we are announcing today will unlock the tremendous value of these unique quality assets,” said CBS Chief Executive Leslie Moonves.
“We have studied the benefits of converting our Americas operations into a REIT, and we are increasingly enthusiastic that this transaction – as well as the sale of our business in Europe and Asia – will achieve significant value for our shareholders,” added Moonves.
Real estate investment trusts, or REITs, don’t pay federal income taxes as they distribute most of their earnings to shareholders through dividends. REITs are a popular avenues for companies to reduce their tax expense and enhance returns to shareholders.
CBS Outdoor is one of the leading outdoor advertising companies in the world, operating billboards and ads that appear in bus stations and subway stations. CBS’s outdoor business recorded revenues of $1.38 billion in the first nine months of last year, or 13 percent of its total sales.
As part of its plan to convert its outdoor Americas division into a REIT, CBS said it will submit a request for a private letter ruling from the Internal Revenue Service during the first quarter of 2013. If the ruling is granted, CBS could complete the REIT conversion in the taxable year beginning in 2014.
CBS closed Wednesday at $37.94, down 0.42%, on a volume of over 5 million shares on the NYSE. In after hours, the stock gained $3.11 or 8.20%.
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by RTT Staff Writer
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