Why CBS Shares Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of broadcasting giant CBS (NYSE: CBS  ) were beaming higher today, gaining as much as 12% after announcing it would spin off part of its outdoor advertising unit -- essentially billboards -- into a real estate investment trust, and divest from the other part.

So what: The media company plans to move North and South American operations into a REIT, while divesting from the European and Asian divisions. CEO Les Moonves said the decision "will unlock the tremendous value of these unique quality assets." According to some analysts, the deals could be worth $3 a share to investors.

Now what: It's unclear how much of a stake CBS would retain in the new REIT, or if it would be a separately-traded stock. REITs, by law, pay out 90% of their income as dividends to investors.

The market has a tendency to cheer asset sales or spinoffs such as this one, especially when the two segments are unrelated. In this case, while both divisions are funded by advertising, the outdoor unit does not have the same content requirements that CBS faces in its TV and radio business. In the near term, the sale, which is expected to be completed by 2014, could help CBS pay off some of its nearly $6 billion in debt.

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