CBS Outdoor Plans $560M IPO, REIT Election

NEW YORK CITY—CBS Outdoor Americas Inc., the outdoor advertising arm of CBS Corp., said in a regulatory filing Monday it plans to rise as much as $560 million in an IPO. The company would seek to become one of the first REITs backed by billboard displays, although competitor Lamar Advertising Co. is also seeking to go the REIT route.

The initial offering would be for 20 million shares priced between $26 and $28 per share. It would value CBS Outdoor, which operates more than 350,000 outdoor displays across the Americas, at about $3.36 billion. The company plans to trade on the New York Stock Exchange under the symbol CBSO.

CBS Corp. first announced in January 2013 that it planned to convert the CBS Outdoor division into a REIT. A CBS insider told GlobeSt.com at the time that the company saw a trend toward specialty REITs and Wall Street's positive acceptance of them.

Since then, the regulatory climate on REIT conversions has become a bit icier. Last month, Rep. David Camp (R-MI), chairman of the House Ways and Means Committee, released draft proposals titled the Tax Reform Act of 2014, which includes several provisions “that would impact our ability to qualify to be taxed as a REIT,” CBS Outdoor said in its SEC filing Monday.

Under Camp's proposals, “in the case of a tax-free separation of a parent and a subsidiary such as we are proposing to undertake, both the parent and the newly separated subsidiary would be prohibited from qualifying as a REIT for 10 years following such tax-free separation,” according to the SEC filing. Additionally, Camp seeks to impose immediate corporate-level tax on the built-in gain in the assets of every C corporation that elects to be treated as a REIT; require that a REIT distribute earnings and profits accumulated prior to its conversion to a REIT in cash, rather than a combination of cash and stock; and, after Dec. 31, 2016, exclude all tangible property with a depreciable class life of less than 27.5 years from the definition of “real property” for purposes of the REIT asset and income tests.

“If any of these proposals or legislation containing similar provisions, with such effective dates, were to become law, it could eliminate our ability to qualify to be taxed as a REIT and we would be subject to US federal income tax on our taxable income at regular corporate rates,” according to CBS Outdoor's filing. Any resulting corporate tax liability could be “substantial” and would reduce the amount of cash available for distribution to the REIT's stockholders, “which in turn could have an adverse impact on the value of our common stock.”