Media powerhouses CBS and Viacom reach merger deal

Lawrence Kim
August 14, 2019

The transforming industry seems to be a primary reason behind this merger, because it puts brands like Paramount Pictures, CBS, Showtime, MTV, Nickelodeon, BET, VH1, Comedy Central, Pluto TV, and The Paramount Network under the same corporate roof. It followed marathon negotiation sessions this week as the two sides hashed out a price for the long-awaited merger.

The companies said they expect the deal, which still needs to win regulatory approval and clear other conditions, will close by the end of this year.

Shari Redstone, the vice chair of both companies who had been pushing for the reunion, noted that she thought the combined unit "can realize the incredible power of their combined assets" and promised "a world-class, multiplatform media organization".

CBS and Viacom said Tuesday they will reunite, bringing together their networks and the Paramount movie studio as traditional media giants bulk up to challenge streaming companies like Netflix.

The all-stock deal, announced Tuesday, unites CBS's Showtime with Viacom's Nikelodeon and MTV, the makers of "SpongeBob SquarePants" and "Jersey Shore" respectively. It also could help them spread out the cost of content purchases like sports rights over a wider swath of channels. It is unlikely that CBS-Viacom could itself become an acquisition target, given how potential acquirers nearly all have their hands full with their own big purchases. The companies say the combined company will have $28 billion in revenue.

The deal represents a victory for Shari Redstone, president of National Amusement, after three attempts since 2016.

The combined company, ViacomCBS Inc., will have more than $28 billion in revenue and the largest market share - 22% - of the USA television viewing audience, according to the companies.

While another acquisition could come later, the CBS-Viacom deal has always been Shari Redstone's top priority.

CBS shares have dropped since then.

But over time, the two companies' fates were reversed. At the time, Les Moonves was head of CBS. The companies held round-the-clock negotiating sessions this week, according to people familiar with the talks.

Viacom CEO Bob Bakish will become the president and chief executive officer of the combined ViacomCBS, the companies said. That strategy didn't work as well as expected, and there's been on-and-off-again efforts to recombine them in recent years. A merger was adamantly opposed by Leslie Moonves, the former powerful chair of CBS who was brought down in a sexual harassment scandal previous year. Ianniello, formerly chief operating officer, has been running the company as interim CEO ever since.

Under the deal's terms, Viacom shareholders would receive about a 0.6 share of CBS stock in exchange for 1 share of Viacom stock. The latter was spun out of CBS in 1971, after the Federal Communications Commission ruled that TV networks couldn't sell programs into syndication after the shows had completed their original run. If it does not successfuly acquire other properties, the merged company may have just made itself appealing enough to be bought by a larger player, like Amazon - which doesn't have a network - or Verizon, which lacks any major TV presence.

Other reports by Click Lancashire

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