Capital Group, the Los Angeles-based institutional investor, on Friday sold its 10% stake in Viacom International, bowing out of Wall Street's war of nerves with the management group that proposed earlier this week to buy Viacom for $40.50 per share.
The sale--handled by Jefferies & Co. at $41 per share--set off a wave of transactions that resulted in the most active volume in Viacom's 15-year history. Wall Street sources said the block of stock was quickly divided and sold on other exchanges to arbitrageurs, who are expected to push management to sweeten its offer.
By the close of trading on the New York Stock Exchange, more than 9.4 million Viacom shares had changed hands, making it the second most active issue of the day. The closing price was $40.75, down $1.375.
With Capital's block of stock now in arbitrageurs' hands, one Wall Street executive said, the situation "is more volatile," because "arbs," as they are called, are seldom "too friendly to management."
(Arbitrageurs are speculators that buy and sell stocks in anticipation of a company's sale or change of control.)
In the past eight days, two other investor groups have disclosed sizable holdings in Viacom. Both groups said they sold none of their shares on Friday.
"We're definitely not selling," said Augustus K. Oliver, general partner of Gollust, Tierney & Oliver, a New York partnership that disclosed three days ago that it controls 12.04% of Viacom through five investment groups.
Sumner Redstone, president of Dedham, Mass.-based National Amusements, owner of a regional movie theater chain, said his group had not sold stock either. Redstone reiterated earlier statements that he was caught by surprise last Tuesday by Viacom management's proposal to take the company private for cash and stock totaling $2.7 billion.
Redstone Raises Stake
The Redstone-led group disclosed last Wednesday that it raised its Viacom stake to 9.9%.
Both investor groups said they have not had an opportunity to review the Viacom management team's proposal, and both said they hoped to arrange meetings with top representatives of Viacom to discuss the bid.
Although the buyout group has not disclosed its members, six Viacom officers have joined President and Chief Executive Terrence A. Elkes in the bid. The other executives are believed to be Gordon E. Belt, George C. Castell, John W. Goddard, Kenneth F. Gorman, Jules Haimovitz and Ronald Lightstone.
It was unclear Friday whether another institutional investor, Alliance Capital Management Corp., sold any of its 1.5 million Viacom shares.
Until recently, the New York-based company was the second largest institutional holder of Viacom shares, after Capital Group.