Viacom buys Channel 5 in push to develop global presence

(Reuters) - U.S.-based Viacom Inc (VIAB.O) said on Thursday it will buy British TV broadcaster Channel 5 from media baron Richard Desmond for 450 million pounds as a keystone to develop its worldwide presence.

Viacom, which owns a stable of cable channels such as MTV, Nickelodeon, Comedy Central and movie studio Paramount Pictures, said the deal will also allow the company to tap new ideas.

Channel 5 is the free-to-air network that broadcasts popular hit shows such as reality show "Big Brother" and the crime drama CSI franchise and has more than 43 million viewers per month, according to the company.

"We are planning to launch more brands internationally and this will accelerate our ability to (do this)," said Viacom CEO Philippe Dauman on a call with investors on Thursday, who said this deal was a "rare opportunity."

Dauman said Channel 5 will provide Viacom with another well of programming to distribute around the world and described British TV as a "fountain of creativity."

For example, Dauman cited Channel 5's "Milkshake!" that provides children programming as a complement to Viacom's Nickelodeon kids network.

Viacom shares fell 1.6 percent to $83.55(49.46 pounds) on Thursday morning after the deal was announced. The company also reported third quarter results, where advertising revenue came in a lower than expected.

Channel 5 was launched as the UK's fifth public service broadcaster in March 1997. It competes with ITV.L (ITV.L) Britain's largest free-to-air broadcaster, the BBC[TBBC.UL] and Channel 4 in the UK.

ITV's shares were up 2.19 percent at 186 pence at 1319 BST on the London Stock Exchange on Thursday.

Desmond sold Channel 5 for more than four times what he bought it. His privately held Northern & Shell media group bought Channel 5 in 2010 for 103.5 million pounds.

Desmond, who also owns the Daily Express and Daily Star newspapers and OK! magazine in the UK, is credited with turning the channel around by cutting costs aggressively and focusing on cross-platform promotion and reality TV shows.

Viacom will finance the deal, which is subject to regulatory approvals, with existing cash and expects the acquisition to add to earnings immediately after closing.

The media conglomerate controlled by Sumner Redstone generated about 16 percent of its 2013 revenue from Europe, noted Vijay Jayant, an analyst with ISI Media.

"This acquisition in one of the strongest markets in Europe will help diversify the company's exposure," he said.

Channel 5 had reportedly drawn interest from more than 20 potential buyers, including Discovery Communications (DISCA.O), Scripps Networks (SNI.N) and British Sky Broadcasting Group (BSY.L).

The deal could be good news for BSkyB, which provides advertising sales for Viacom in Britain. Were BSkyB to add Channel 5 ad sales to its portfolio it would be able to provide a stronger challenge to Channel 4 and ITV.

Barclays advised Northern & Shell on the deal.

(Reporting by Karen Rebelo, Richa Naidu and Supantha Mukherjee; Editing by Richard Chang, Rodney Joyce and Sofina Mirza-Reid)