Cbs Outdoors Spit-Off Tax Analysis

CBS Corporation (“CBS” or “CBS Corp.”) is a mass media company that operates businesses that cover the whole spectrum within the media and entertainment industry. It operates in four segments:

• Entertainment

• Publishing

• Local Broadcasting

• Cable Networks

Viacom was created in 1970 as a division of CBS and was spun-off in 1971. In 1999, Viacom acquired its former parent and they all started operating under the Viacom name. In 2005 Viacom announced it was planning on splitting the company into two publicly traded companies: Viacom (which was actually the company spun off) and CBS corporation (the legal successor of Viacom).

In January 2013, CBS announced that it was taking the steps necessary to divest its outdoor advertising business, selling its European and Asian divisions and converting its American and Canadian operations into real-estate investment trusts.

In this paper, we will analyze the tax implications of this plan, focusing our attention in the American operations. We will examine tax code sections that are relevant to this case and how particular requirements were satisfied, allowing CBS to dispose its American outdoor advertising assets in a tax free manner.

Transaction motivation

CBS’s CEO, Leslie Moonves announced a plan to divest businesses that were non-core for the firm as part of a plan to focus on content generation. In the investors conference in December 2012, he disclosed that CBS Outdoors (“CBSO”) was not part of the core assets of the company and thus, was part of the assets they intended to dispose.

The management of the company argued the following as the reasons that motivated the transaction, gathered from various interviews:

• Focus

o CBS Outdoors is a non-core asset. CBS Corp. wants to focus on content generation.

o Outdoors division was not getting the capital allocation that it needed.

• Synergies

o There are no synergies between outdoor advertising and the other assets the company holds in terms of cost savings....