The on-again, off-again merger talks between former corporate siblings CBS and Viacom reportedly are poised to restart.
According to the New York Post, the media giants “are gearing up” to begin discussions about joining forces though it wasn’t clear when talks would begin. Even so, Wall Street cheered the news, boosting Viacom’s stock price by nearly 8 percent to $28.33. Shares of CBS closed at $47.33, a 4 percent gain.
The Post report comes a day after AT&T renewed its contract to carry Viacom’s cable channels on its DirecTV satellite TV and U-Verse services and its DirecTV Now “skinny bundle” of channels aimed at cord-cutters. The deal, worth a reported $1 billion, avoided a blackout of Viacom’s cable channels such as BET, Comedy Central, and Nickelodeon on AT&T platforms that would have hurt both companies.
Viacom and CBS have a strange history. Viacom bought the parent company of the most watched television network for $36.5 billion in 1999, a deal that CNN at the time predicted would “bring the network of Dan Rather in touch with the MTV generation." Seven years later, Sumner Redstone, who controlled both companies through his movie theater chain National Amusements Inc. (NAI), soured on the idea of diversified media conglomerates and split Viacom and CBS.
Fast forward to the present and CBS and Viacom with market capitalizations of $18 billion and $12 billion respectively find themselves as “small fish” in a media sea dominated by “whales” such as Netflix ($157 billion), Comcast ($179 billion) and Walt Disney ($198 billion). BTIG Analyst Richard Greenfield, who has advocated the merger for years, estimates joining CBS and Viacom would generate $1 billion in cost savings heading into 2020.
Gaining additional size is critical as the companies renew agreements with cable, satellite and telecom companies to carry their programs. Merging with Viacom would also bulk up CBS' financial muscle when the broadcast rights for the NFL comes up for renegotiation. Though the current NFL contract expires in 2022, broadcast rights deals are often extended years in advance of their expiration.
Former CBS CEO Les Moonves filed to suit last year to block a Viacom-CBS merger that was backed by Sumner Redstone’s daughter Shari Redstone, president of NAI and vice chairman of both CBS and Viacom. As part of the settlement of that case, Redstone agreed not to raise the possibility of a Viacom-CBS merger for at least two years. Moonves was ousted in the wake of numerous sexual misconduct allegations.
According to the Post, CBS and Viacom need to come to terms on both the deal’s price and who would run the merged company.
New York-based CBS is going to ask for a premium valuation in the all-stock transaction since its shares have outperformed Viacom’s, the newspaper said. Interim CBS CEO Joe Ianniello and Viacom CEO Robert Bakish are in the running for the permanent CEO position though Bakish is the front-runner since he is a favorite of Redstone, the Post said. The newspaper reported that Ianniello is under consideration for another senior management position.
CBS and NAI declined to comment for this story. Viacom couldn't immediately be reached.
