CBS and Viacom reach agreement in principle on merger

Deal would reunite entertainment empire separated 13 years ago

A woman exits the Viacom headquarters in New York. Photograph: Lucas Jackson/File Photo/Reuters

A woman exits the Viacom headquarters in New York. Photograph: Lucas Jackson/File Photo/Reuters

 

CBS and Viacom have reached an agreement in principle, sources familiar with the matter said on Tuesday, reuniting media mogul Sumner Redstone’s US entertainment empire after 13 years apart.

Viacom shareholders will receive 0.59625 CBS shares for each share they own, representing a slight discount to Viacom’s closing price on Friday. At this level a deal would value Viacom at around its current market value of close to $12 billion (€10.7 billion).

The two companies are controlled by National Amusements Inc, the holding company owned by Mr Redstone and his daughter, Shari. The deal represents a victory for Ms Redstone, president of National Amusement, after three attempts in as many years.

The recombination comes amid an increasingly competitive media landscape dominated by Walt Disney and Netflix, prompting Redstone to pursue a merger.

The last time the companies were in merger discussions, more than a year ago, Viacom directors had agreed to take 0.6135 of a CBS share for every non-voting share of their business, people with knowledge said at the time. The companies now expect about $500 million of annual cost savings from the deal after Viacom took about $300 million in costs out of its business, one of the people said. The two sides, using the code names Comet and Venus, had earlier expected to save at least $1 billion by combining.

Failed merger attempts

The deal would unite the most-watched US broadcast network with the owner of the Paramount movie studio and cable channels such as MTV and Nickelodeon. It would also cap years of failed merger attempts and board infighting at both companies. The companies are likely to highlight how greater scale will help them negotiate with third parties, MoffettNathanson analysts said in a note to clients on Friday.

“CBS’s and Paramount’s production asset will quickly move up the ranks to challenge the big boys of Disney, Comcast, AT&T and Netflix, and will be an attractive home for creative talent,” they said.

CBS would receive six seats on the 13-member board, while Viacom would get four, people familiar with the matter said. Another two would be designated to NAI, they said, with Redstone and family attorney Robert Klieger slated for those roles. Strauss Zelnick, the video-game executive who is the interim CBS chairman, has stated he is not interested in an ongoing role. The Information reported on the likely board composition last week.

CBS and Viacom, both based in New York, were one entity until 2006, when the Redstone family decided investors would give them greater value as separate companies.

CBS has been weighing its next moves since the ousting of long-time chief executive Les Moonves last year. He was fired in September after a dozen women accused him of sexual misconduct, setting off a shake-up that included a board overhaul. Joe Ianniello, formerly chief operating officer, has been running the company as interim chief executive ever since. – Reuters/Bloomberg