The battle to combine CBS and Viacom has entered the realm of the surreal, with CNBC reporting that the vice chair and largest shareholder of both companies, Shari Redstone (pictured), would fire CBS chair and CEO Les Moonves if the two companies fail to merge.
CBS and Viacom have both created special committees to explore a merger, and both sides have submitted proposals, although they are far apart on valuation. But the biggest obstacle appears to be on the leadership front.
Moonves, who according to reports would lead the combined company for two years after the deal closes, wants his current No.2 chief operating officer Joe Ianniello, to take a similar role in the new company. Redstone apparently favors current Viacom CEO Bob Bakish for the No. 2 spot, and appears to be ready to go to the mattresses to ensure that happens.
“The industry and the marketplace know Leslie Moonves’ record and we think it speaks for itself,” CBS said in a statement.
In its own statement, National Amusements, the entity controlled by the Redstone family that holds about 80% of the voting control of both Viacom and CBS, appeared to throw support to Moonves.
“National Amusements has tremendous respect for Les Moonves and it has always been our intention that he run a combined company,” NAI said in the statement.
While the thought of a palace coup orchestrated by Redstone makes for good theater, it would be a lot harder to execute. Moonves serves at the discretion of the board, and though Redstone could oust board members and replace them with cronies, it would take time and could potentially open the company up to myriad shareholder lawsuits.
But the fact that Redstone is even considering ousting Moonves points to how much the negotiations have deteriorated in the past few months.
CBS shares were down about 2.2% ($1.14 each) to $50.98 per share and Viacom shares were down 1.2% (38 cents each) to $30.66 per share in early trading Wednesday.
CBS is expected to submit another proposal to Viacom, but CNBC said, citing sources familiar with the talks, that it is expected to be below Viacom’s own valuation. CBS had earlier put forward a deal that would give Viacom shareholders 0.55 shares of CBS for every Viacom share they held. Viacom countered with a proposal that would lift that valuation to 0.68 shares of CBS for every Viacom share.