CBS, Viacom Move Closer to Remarriage

Analyst sees official word coming soon with most major obstacles cleared
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CBS and Viacom could be headed back to the negotiating table in the next few weeks, after reports surfaced that leadership of both companies had earmarked a mid-June deadline for talks.

According to a report by CNBC’s David Faber, CBS’s board of directors decided to initiate the talks after a regularly scheduled board meeting on May 29 in New York. This would be the third time CBS and Viacom have explored recombining the two companies since they split in 2006.

Key shareholder Shari Redstone (l.) is said to see Viacom CEO Bob Bakish as head of a recombined company.

Key shareholder Shari Redstone (l.) is said to see Viacom CEO Bob Bakish as head of a recombined company.

CBS and Viacom declined to comment.

Sources familiar with both companies would neither confirm nor deny that talks were scheduled, saying only that discussions around a possible recombination have been off and on between the two companies for the past three years.

Earlier attempts to get back together in 2016 and 2018 were thwarted by CBS’s reluctance, seeing little benefit in being paired with Viacom’s cable networks and a low valuation of Viacom’s assets. Primary shareholder National Amusements (NAI), headed by Sumner Redstone and his daughter, Viacom and CBS vice chair Shari Redstone, has tried to combine the companies in the past, only to pull back at the last minute.

CBS has undergone its own turmoil in the past year, with the departure of chairman and CEO Les Moonves in September after a lurid sexual-harassment scandal. While long-time executive Joseph Ianniello has stepped in as interim CEO — he renewed his deal though 2019 and CBS ended its search for a permanent CEO in April — many observers believe that Viacom CEO Bob Bakish, a Shari Redstone favorite, will end up running the combined company.

The media climate has changed dramatically since the last two attempts at a merger, with The Walt Disney Co. buying certain 21st Century Fox programming and production assets for $71.3 billion, and AT&T completing its $107.8 billion purchase of Time Warner Inc. Increased scale appears to be the main driver in the industry as traditional linear programmers fight off growing competition from direct-to-consumer, OTT and SVOD service providers.

Viacom has had a particularly hard go of it, getting dropped by Cable One in 2014 and reportedly offering discounted rates to AT&T in its last carriage negotiation with the DirecTV and DirecTV Now parent. A pairing with CBS, which includes the No. 1 broadcast network in total viewers and premium channel Showtime, would likely mean stiffer fees for distributors.

Viacom has made smaller acquisitions over the past year, including ad-supported streaming video service Pluto TV for $340 million in March and, in July 2018, short-form video studio AwesomenessTV for an estimated $50 million. Recombining with CBS’s broadcast network could possibly give Viacom a stronger streaming presence with the CBS All Access service.

Wolfe Research managing director Marci Ryvicker said in a note to clients that she was more excited than ever of the possibility of a recombination of CBS and Viacom, adding that she believes the official announcement of talks could come in “any day/week/minute” and that “most major obstacles [are] behind both companies.”

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