John Malone Sees Viacom Opportunity, Says Stock Undervalued

(Bloomberg) -- Viacom Inc. is undervalued because of the turmoil over the battle for control of the company, said billionaire John Malone, who's been piling up media acquisitions with the eventual plan to roll them together.

Shares of the owner of MTV and Comedy Central have gained less than 1 percent this year, trailing the 5.6 percent gain of the Standard & Poor's 500 Media Industry Group Index. Investors have been stuck in the middle as Vice Chairman Shari Redstone tussles with Chief Executive Officer Philippe Dauman over the company's future.

“They've got some great assets and, right at the moment because of the turmoil, they're substantially undervalued,” Malone, 75, said after arriving in Sun Valley, where Allen & Co. hosts an annual conference of media and technology moguls.

Class B Shares of Viacom rose 3.1 percent to $42.68 at 10:37 a.m. in New York. The stock had fallen 35 percent in the past year through Wednesday.

Malone is pursuing tie-ups in a challenging entertainment landscape marked by sluggish advertising sales and shrinking audiences. Last week, Lions Gate Entertainment Corp. agreed to buy Malone's Starz in deal valued at $4.4 billion. The billionaire said he wants to give Starz and Lions Gate “the opportunity to be bigger, more aggressive.”

Malone hold stakes in both companies, as well as Discovery Communications Inc., and analysts say he likely has several other targets in his sights, including AMC Networks Inc., Scripps Networks Interactive Inc. and Viacom, which could end up for sale depending on the outcome of a legal battle pitting Dauman against controlling shareholder Sumner Redstone, 93, and his daughter Shari.

“Sumner has been a long-term friend and sometimes partner and sometimes frenemy, and you hate to see the stress in a family situation,” Malone said. “I certainly hope it all works to everybody's benefit. They've created some great assets over the years and are a very important part of our industry.”

Dauman, who hasn't been seen at the conference, is locked in a legal battle with Shari Redstone over whether her father is still capable of making major strategic decisions for the company. As Dauman fights to keep his job, interest in recombining Viacom with CBS -- another Redstone-controlled company -- has been building among the investment community. CBS, owner of the most-watched U.S. TV network, has outperformed Viacom in recent years, and a merger could put everything under Les Moonves, that company's CEO.

“Les would do a terrific job if they wanted to go that way because he's an excellent operator, but I have no idea what Shari has in mind as a strategic direction,” Malone said.

U.K. ‘Going to be Fine'

As Europe grapples with the fallout of the U.K.'s vote to leave the European Union, Malone said the region is “going to be fine.” Malone is one of the largest shareholders of Liberty Global Plc, the continent's largest cable TV company.

“The reaction has been way overblown,” Malone said. “This will create investment opportunity in the U.K. and I think also a fair chance that they work out their EU issues.” He added: “Rational people will ultimately figure this out.”

One concern is that the U.K. will start competing with Ireland as the “most business-friendly player” as the pound loses value. Malone said he was a big investor in Ireland.

To contact the reporter on this story: Anousha Sakoui in Los Angeles at asakoui@bloomberg.net. To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Paul Barbagallo, Rob Golum