Wednesday, April 11, 2018

Potential Viacom / CBS Merger Latest: Viacom Makes Counteroffer; Wants Bakish To Be President & COO Of Combined Company [Updated 4/10]


Latest (4/11): Shari Redstone is likely to replace CBS chief Les Moonves if no merger deal is reached with Viacom, sources have told CNBC. CBS is expected to make another offer soon, but the new bid is expected to fall short on price, sources say.

If Moonves is removed as CEO of CBS, the exec could collect an eye-opening $184 million from the company, reports Deadline.

Latest (4/10): Viacom in recent days got an expression of interest from a major media and tech company — but it was rebuffed by Viacom, according to a source briefed on the situation, reports the New York Post.

That prospective bidder was particularly interested in Viacom’s Paramount Pictures unit as it floated an interest in the entire company, the source said. Meanwhile, other media companies have expressed an appetite for its TV networks, including Nickelodeon, Comedy Central and BET, according to sources. “If Viacom launched an open sales process, there would absolutely be buyers,” a source closely following the merger talks said.

Viacom’s reluctance to engage with suitors other than CBS has, in turn, convinced many insiders that CBS and Viacom are determined to overcome their differences, the source added.

Media tycoon Sumner Redstone — whose holding company National Amusements Inc. has voting control of both CBS and Viacom despite his only owning about a 10-percent economic interest in the media businesses — doesn’t want to let Viacom go, according to one source. Accordingly, “Sumner has made Viacom Shari’s baby,” the source added, referring to his daughter, Shari Redstone, who is now pulling strings as vice chair of both CBS and Viacom. “I would be very surprised if they sold Viacom.”

Latest (4/9): Viacom is pushing CBS Corp. to raise its takeover bid for the company, asking for a deal that would add nearly $3 billion to the valuation of the company. Viacom has asked CBS to raise its all-stock bid to a level that would value the company at around $14.7 billion. Viacom as expected is also pushing for its current CEO, Bob Bakish to be named president and chief operating officer of the combined company, to be led by CBS’ chairman-CEO Leslie Moonves. News of Viacom’s counteroffer was first reported early Monday (9th April 2018) by Reuters. A source close to the situation confirmed Viacom’s counteroffer despite the fact that both Viacom and CBS have yet to publicly acknowledge the statis of acquisition negotiations. CBS is speculated to reject Viacom's counteroffer.

Additionally, one of CBS Corp.’s biggest shareholders has written to the company’s board saying it should only proceed with a deal for Viacom Inc. if certain terms can be agreed on. The shareholder, who declined to be identified, wants CBS Chief Executive Officer Leslie Moonves and his management team to lead the combined company. If that doesn’t happen CBS should be compensated with a “clear premium” when the final share ratio of a deal is decided, according to the letter obtained by Bloomberg. A merger with Viacom isn’t the “optimal strategic path” for CBS, the shareholder wrote in the letter, dated March 21. It urges the broadcaster’s special committee of independent directors not to pay above current market price in any transaction. “Coming to the rescue of a weakly positioned, poorly executing, over-levered Viacom is not CBS’s burden,” the investor wrote. The shareholder is among the top 10 CBS holders, according to a person familiar with the matter who asked not to be identified as the details aren’t public.

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Latest (4/4): Viacom has swiftly rejected CBS’s below-market offer to reunite the US media companies separated over a decade ago, kicking off what is likely to be one of the most hotly contested takeover battles in the traditional broadcasting and film industry. However, Viacom is speculated to make a counterproposal this week, people familiar with the matter have said.

CBS offered 0.52 of its shares for each Viacom class B share, valuing the owner of Nickelodeon, MTV and the Paramount film studio below its $12.8bn market capitalisation, said people briefed about the matter.

Viacom believed the bid failed to recognise the fair value of the company, people close to its senior management said, adding that CBS would have to offer more than 0.62 of its own shares to get a deal done.

The significant gap in valuation, however, is not the only obstacle to getting a deal done.

Les Moonves, chairman and chief executive of CBS, wants the combined company to be run by his lieutenants. According to people briefed on CBS’s proposal, Mr Moonves would remain in charge and Joe Ianniello, CBS’s chief operating officer, would be his second-in-command, leaving Bob Bakish, Viacom’s chief executive officer, out of the picture.

Shari Redstone, who controls both companies through the holding group National Amusements, favours Mr Bakish as the second-most senior figure in a combined company, said people briefed about the matter.

Negotiations between the two sides were likely to stretch for several weeks, said people close to both sides.

Although the Redstone family are keen to get a deal done, believing that a merger would generate significant annual synergies, it remains unclear whether an agreement between the top managers of the two companies an be reached.

A deal would reunite CBS and Viacom 13 years after Ms Redstone’s father, Sumner, split them in an effort to allow Viacom to grow faster.

At the time, Viacom was one of America’s hippest media companies, with many analysts believing that MTV and Comedy Central would experience record revenue growth based of the wide appeal they had on younger television viewers. However, with the advent of digital champions such as Netflix, HBO and Vice, Viacom’s top brands struggled to perform as expected.

CBS, which in the mid-2000s was viewed as the weaker unit of the then combined group, has instead flourished under the leadership of Mr Moonves. CBS’s stock value has more than doubled since the split, while Viacom’s has fallen below its debut as an independent company.

Original post:

Viacom / CBS Merger: Viacom Inc. Board Forms Special Committee to Evaluate Potential Combination with CBS Corporation

Viacom Inc. Board Forms Special Committee to Evaluate Potential Combination with CBS Corporation

Update (2/1): Viacom Inc. (NASDAQ: VIAB, VIA) today announced that its Board of Directors has established a special committee of independent directors to evaluate a potential combination with CBS Corporation. The Committee has retained independent legal counsel and is retaining independent financial advisors in connection with this evaluation.

There can be no assurance that this process will result in a transaction or on what terms any transaction may occur. Neither Viacom nor the Committee intends to comment further until the process is completed.

About Viacom

Viacom is home to premier global media brands that create compelling entertainment content - including television programs, motion pictures, short-form content, apps, games, consumer products, podcasts, live events and social media experiences - for audiences in more than 180 countries. Viacom's media networks, including Nickelodeon, Nick Jr., MTV, BET, Comedy Central, Paramount Network, VH1, TV Land, CMT, Logo, Channel 5 (UK), Telefe (Argentina), Colors (India) and Paramount Channel, reach approximately 4.3 billion cumulative television subscribers worldwide. Paramount Pictures is a major global producer and distributor of filmed entertainment. Paramount Television develops, finances and produces original programming for television and digital platforms.

For more information about Viacom and its businesses, visit www.viacom.com. Viacom may also use social media channels to communicate with its investors and the public about the company, its brands and other matters, and those communications could be deemed to be material information. Investors and others are encouraged to review posts on Viacom’s company blog (blog.viacom.com), Twitter feed (twitter.com/viacom) and Facebook page (facebook.com/viacom).

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Update (4/3): CBS Corp. will offer less than the current market value of Viacom Inc. in its opening bid for the owner of Nickelodeon and MTV, according to a person with knowledge of the matter, showing how far apart the companies are as they explore recombining.

CBS' proposed all-stock offer — which could come in the next few days — is expected to put a lower valuation on Viacom than its current market capitalization, according to a person familiar with the process but not authorized to discuss it.

In addition, the CBS offer is expected to stipulate that its chairman and chief executive, Leslie Moonves, would run the combined company for at least two years, the knowledgeable person said. Moonves' contract with CBS goes through mid-2021.

Viacom and CBS vice-chairwoman Shari Redstone is pursuing a merger of the two media companies that split more than a decade ago, according to multiple insiders who spoke to TheWrap.

With the Hollywood landscape quickly shifting, Redstone, president of the privately-held National Amusements that controls both media companies, has concluded that a bigger footprint is necessary for the companies to thrive. CBS’ core business is broadcast television along with multiple digital properties, while Viacom holds cable channels like Nickelodeon and Comedy Central along with the Paramount movie studio.

A time frame for any potential merger is unclear, but three individuals with knowledge of the companies said that Redstone is actively moving in that direction, which represented another shift in her back-and-forth mindset on the matter.

Viacom and National Amusements declined to comment, and CBS had no immediate response to a request for comment.

Viacom shares reacted quickly to the news. Shares of the company, which controls MTV, Nickelodeon, Comedy Central and the Paramount movie studio, rose nearly 10% Friday, or $2.95 a share, to $33.76 a share from $30.90. Volume was strong – 12.45 million shares – compared to average volume of 5.07 million.

Shares of CBS rose more modestly, up 1.85%, or $1.07 a share, to $58.83 a share from $57.78. Volume was 6.19 million compared with average volume of 4.01 million.

CBS chairman Les Moonves, who has long resisted talk of recombining the companies, is now open to the possibility, the insiders said. He would be the most likely person to run the merged companies, though Redstone is considering other candidates, according to two insiders.

An individual close to Moonves acknowledged the process to TheWrap: “He’s having active discussions with Shari and the board on a wide variety of issues all the time, including this one. And those discussions continue with regard to looking to merge the two companies.”

One insider told TheWrap that Redstone was looking at other candidates because Moonves was demanding an ownership stake and she thought his demands were too rich. The individual close to Moonves disputed this, saying: “At no time has he asked for an ownership position.”

The move to merge the companies represents another reversal for Redstone, who directly appealed to CBS and Viacom to merge in September 2016, then retreated from this in the following months, presumably because of Moonves’ opposition.

In a letter in September 2016 to both boards from her parent company National Amusements, she touted the potential of “substantial synergies” that a merger would bring. She called on the boards to “respond even more aggressively and effectively” to combat the challenges they both faced.

Redstone later reconsidered after ousting Viacom CEO Philippe Dauman and replacing him with Bob Bakish — whom she installed after successfully wresting control of Viacom in a bruising boardroom and legal battle over succession plans involving her father, Sumner Resdstone.

“We talked about it, and what became apparent to me very quickly was that our assets were severely undervalued, which I had understood, but what I didn’t understand at the time was the significant upside that existed in our businesses once we had a good management team in place and the culture came back,” Redstone said at last May’s re/code conference.

The new merger talk comes amid a new period of consolidation in the entertainment and media industry. In December, Disney announced plans for a $52.4 billion acquisition of the bulk of 21st Century Fox’s movie and TV assets, while telecom giant AT&T is attempting to complete the $85.4 billion acquisition of Time Warner announced more than a year ago.

Meanwhile, the rise of streaming giant Netflix as well as the ambitious moves by tech giants like Amazon and Apple into the entertainment content space have set off a period of strategic change in the sector.

The market cap of Viacom is $12.7 billion, while the market cap of CBS is $23.2 billion.

In February 2016, the then 92-year-old Redstone stepped down as chairman of both Viacom and CBS amid questions about his age and mental competency. Moonves assumed the chairman title at CBS, while Viacom CEO Philippe Dauman was ousted and ultimately replaced by Robert Bakish.

Viacom and CBS had merged into a single company in 1999, which Sumner Redstone split in 2005 in an attempt to maximize shareholder value.

The Redstones control both the CBS and Viacom through their supervoting shares held by National Amusements.

As of December 2016, National Amusements, directly and through subsidiaries, holds approximately 79.8 percent of the Class A (voting) common stock of Viacom Inc., constituting 10 percent of the overall equity of the Company, and holds approximately 79.5 percent of the Class A (voting) common stock and 2.4 percent of the Class B (non‐voting) common stock of CBS Corporation, constituting 9.1 percent of the overall equity of the Company.

Also, from Variety:

Viacom, CBS Shares Rise After Report Suggests New Merger Talks Have Started

Shares of both Viacom Inc. and CBS Corp. rose noticeably Friday after a new report suggested the two companies, both controlled by the Redstone family, could once again be considering the prospect of merging.

A report in The Wrap suggested Shari Redstone, president of the family’s National Amusements movie-theater chain, had recently sparked new discussions within the companies about a possible merger. Her father, Sumner Redstone, had combined CBS and Viacom in 2000, only to pull them apart six years later. National Amusements in September of 2016 formally requested that the boards of both companies consider the possibility of a new merger on an all-stock basis, then stopped the process at the end of that year.

CBS declined to comment. A Viacom spokesman did not immediately respond to a query seeking comment.

The report comes as more media companies are considering tie-ups that would give them a larger footprint in a sector that has been flummoxed by new technology and consumer patterns. Monetizing viewership of content has become more difficult as consumers migrate to new video screens and behaviors that aren’t measured as easily, crimping the flow of advertising support and undermining media companies’ ability to lock in fees from distributors.

To fight back against these trends, a number of prominent media companies have set big acquisitions or outright mergers. Among the recent combinations: Charter Communications and Time Warner Cable and Lionsgate and Starz. Other tie-ups have been proposed but not completed. Discovery Communications is expected to finalize its purchase of Scripps Networks Interactive later this year. AT&T is pursuing legal options to finalize its proposed merger with Time Warner. And Walt Disney has agreed to purchase a substantial chunk of 21st Century Fox, including the 20th Century Fox movie studio, the FX and National Geographic cable networks and a passel of regional sports operations.

The companies that don’t embrace other assets have begun to look considerably smaller.

If a merger is being discussed, it is not on a fast track. A person familiar with the situation suggested no substantive steps in any process were taking place at the current time.

Viacom shares reacted quickly to the news. Shares of the company, which controls MTV, Nickelodeon, Comedy Central and the Paramount movie studio, rose nearly 10% Friday, or $2.95 a share, to $33.76 a share from $30.90. Volume was strong – 12.45 million shares – compared to average volume of 5.07 million.

Shares of CBS rose more modestly, up 1.85%, or $1.07 a share, to $58.83 a share from $57.78. Volume was 6.19 million compared with average volume of 4.01 million.

CBS has fared well in recent months, despite its medium size in the sector. The owner of the CBS broadcast network and the Showtime cable outlet has in recent months focused on maximizing the revenue it draws from its content by scrutinizing the fees it draws from retransmission and overseas syndication. Rather than make big acquisitions, CBS has launched a spate of new digital businesses, including the “CBS All Access” subscription video on demand service and a streaming-video news product, CBSN, that makes new use of content from CBS News. Leslie Moonves, the company’s chairman and CEO, has discussed the launch of a new streaming-video sports-content service and CBS has unveiled interesting plans for “All Access,” like a revival of the classic series, “The Twilight Zone.”

Viacom, meanwhile, has worked to recalibrate itself under a new leader. Bob Bakish took over as CEO of the company in December of 2016 and has since that time reorganized the company and placed new leaders in charge of MTV and set about to transform the company’s Spike cable outlet into a more general-entertainment property called the Paramount Network. A launch is slated in the days ahead. Bakish has also placed more emphasis on events related to some of the company’s big assets, including a new festival launched by Comedy Central.

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Also, from the LA Times:

Shari Redstone once again eyeing a merger of CBS and Viacom

Shari Redstone wants to recombine CBS Corp. and Viacom Inc. to better fortify the two medium-sized media companies at a time when other entertainment companies are scrambling to bulk up.

There are no merger talks underway, three people familiar with the matter who were not authorized to publicly discuss the situation said Friday. However, Redstone, whose family controls the voting shares of CBS and Viacom, ​​​​​​ increasingly sees a merger as a compelling option for the two companies that have operated separately for 12 years, according to these people.

Redstone, who serves as vice chair of both companies, has expressed her feelings to the leadership and boards of the two entities, according to the sources.

"Shari is determined to get them back together," said one of the sources. "Everything else she could think of went nowhere."

Redstone was not immediately available for comment.

Viacom owns MTV, Comedy Central, BET Nickelodeon and the Paramount Pictures film studio in Hollywood. CBS owns the CBS broadcast network, TV stations, premium channel Showtime and a boutique film studio.

Her rekindled interest in merging the companies, which was reported Friday by the Hollywood trade publication the Wrap, comes as little surprise. Redstone previously said she didn't support the decision by her father, the ailing mogul Sumner Redstone, to divide the family empire in 2006.

"I was never a great proponent of the split of the two companies," she said at a media conference in November 2016.

Earlier that fall, Redstone announced that she wanted the two companies to explore a merger and board-level exploration committees were formed. The stronger CBS began evaluating whether to acquire Viacom, but the talks fell apart in December 2016 over a valuation of Viacom, which has seen its stock fall more than 50% since early 2015.

Redstone also decided that she wanted to give Viacom Chief Executive Bob Bakish — who was appointed at the end of 2016 — a chance to turn around the company.

But much has changed in the last year. Key Viacom cable channels continue to struggle with ratings declines and accelerated cord cutting. Viacom generates its profit from cable TV channels, so the shrinking universe of pay-TV homes makes it more difficult to grow its business.

Compounding matters, Paramount is coming off another rough year, with recent flops such as "Suburbicon," "Mother" and "Downsizing." The studio ranked seventh last year among all distributors in market share in the United States and Canada, according to Box Office Mojo.

Paramount's new chairman and CEO, Jim Gianopulos, who joined last year, has been shaking up the studio's executive ranks in an effort to engineer a turnaround.

Meanwhile, CBS' stock stagnated in 2017 as investors grew less bullish on media.

Other medium-sized companies have become merger bait as traditional media companies see increased scale — and distribution — as a way to compete with the likes of Google, Facebook, Amazaon.com and Netflix.

Telecommunications giant AT&T is trying to buy Time Warner Inc., which owns HBO, CNN, TBS and the Warner Bros. movie and television studio. Last summer, two other cable programmers — Scripps Networks Interactive and Discovery Communications — agreed to their own merger.

Then last month, Rupert Murdoch's 21st Century Fox stunned the industry when it agreed to sell much of the company, including the 20th Century Fox movie and television studio, to the Walt Disney Co. Analysts and investors predicted the blockbuster deal would trigger other consolidations, including a recombination of Viacom and CBS.

People close to the companies quickly cautioned that there was no timetable for a deal, or even if one would happen.

"There have been talks about this — and many other things — at the board level," according to one person close to CBS.

Others have speculated on the prospect of a roll-up of CBS, Viacom and Lionsgate. Lionsgate, in recent years, has been more successful than Viacom's movie division.

Viacom shares closed Friday at $33.76, up $2.95, or nearly 10% on Friday.

CBS stock closed up nearly 2%, or $1.05 to $58.83 a share.

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Also, from Observer:

CBS and Viacom Reportedly Eyeing Merger

What once was broken may be made whole once again.

TheWrap is reporting that Viacom and CBS vice-chairwoman Shari Redstone is looking to merge the two media companies following their split in 2006.

Amid the Hollywood arms race that has seen AT&T attempt to acquire Time Warner and Disney swallowing up 21st Century Fox, Redstone, who serves as president of National Amusements Inc. and controls both media companies, is looking to scale her own business to keep pace.

CBS earns its keep with broadcast television—the small screen’s most-watched show, The Big Bang Theory, has them set up nicely—and several digital properties. Viacom owns Paramount Pictures, as well as popular cable destinations such as Comedy Central and Nickelodeon.

CBS led all television networks in total viewers last year, according to Nielsen data.

But how serious are these discussions? It depends on who you ask.

According to Reuters, “Viacom Inc and CBS Corp are not in active merger discussions, although controlling shareholder Shari Redstone has had exploratory conversations with CBS directors about recombining the companies.”

CBS declined Observer’s request to comment. Viacom has yet to respond, neither has National Amusements Inc.

No timeline for the potential deal has emerged yet, though TheWrap’s sources say Redstone is pushing for it. She and father Sumner Redstone unsuccessfully attempted to merge the two in 2016.

CBS chairman Les Moonves, who is said to have been against the merger for some time, is reportedly softening on that position. If the merger were to go through, he is thought to be the frontrunner to head both companies.

Here’s how one of TheWrap’s sources explained it: “He’s having active discussions with Shari and the board on a wide variety of issues all the time, including this one. And those discussions continue with regard to looking to merge the two companies.”

“I’m very confident that our unparalleled collection of businesses will continue to grow in their present form, as well as the many new platforms that are making a splash in the new media landscape,” Moonves said of the split back in 2006. The move was originally made to diversify the media conglomerate and regain the confidence of Wall Street investors.

This rumor pops up as other major deals are going down across Hollywood.

The aforementioned sale of Time Warner to AT&T comes with a price tag of $85.4 billion, while Disney’s acquisition of Fox set them back $52.4 billion. Some insiders have also posited that Apple is eyeing Netflix for an estimated $75 billion.

More details to come…

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Also, from Reuters UK:

Shari Redstone explores adding new CBS directors - WSJ

(Reuters) - Shari Redstone, a controlling shareholder of CBS Corp (CBS.N), has discussed adding new directors to the CBS board as she renews her push to merge the company with Viacom Inc (VIAB.O), The Wall Street Journal reported on Wednesday.

Shari Redstone and Sumner Redstone, her ailing 94-year-old father, together control both CBS and Viacom Inc (VIAB.O) through their privately owned movie theatre company, National Amusements Inc. The Redstones failed in an attempt to merge the two companies in 2016.

Shari Redstone, who is vice chair of the CBS board, has had exploratory conversations with CBS Chief Executive Leslie Moonves and directors about recombining the companies, sources have told Reuters.

While Moonves is receptive to a combination, he has some reservations, sources have told Reuters.

Spokesmen for CBS and Viacom declined to comment.

CBS is looking to replace several of its directors at its annual shareholders meeting in May, and Shari Redstone is gathering names of possible candidates, according to The Wall Street Journal.

Shari Redstone’s push to revisit a CBS merger with Viacom has become more pressing in light of Walt Disney Co’s (DIS.N) planned acquisition of a majority of Twenty-First Century Fox Inc’s (FOXA.O) assets, the sources told Reuters.

A combined CBS, which owns cable networks including Showtime and The Movie Channel as well as the CBS TV Network and CBS TV Studios, and Viacom, whose businesses include Paramount Pictures, Nickelodeon Movies and MTV Films, would have more negotiating leverage with cable and satellite companies.

In addition, Shari Redstone does not want to wait for the verdict on the U.S. Department of Justice’s lawsuit to block AT&T Inc’s (T.N) $85 billion acquisition of Time Warner Inc (TWX.N), which is set to go to trial in March, the sources told Reuters. The Justice Department is suing to block that deal on the grounds that it is anti-competitive.

If that deal were to fall through, it would mean both AT&T and Time Warner Inc may look for other companies to combine with, sources have said.

Viacom’s new CEO, Bob Bakish, has improved relations with distributors, found financing for Paramount Pictures after Chinese investors dropped out and shuffled programming.

Even so, Viacom’s stock is trading around $32 a share, below the $35-$38.80 range it was trading at when it and CBS explored a merger in late 2016.

It is unclear if the valuation and corporate governance issues that caused the deal to fail in 2016 remain.

Some analysts said they believe the selloff in Viacom, along with the consolidation in the media space, should prompt CBS to revisit the deal.

“We think now is as good a time as any to reexamine why we continue to believe this deal is the most logical and appropriate transaction to take place within our media coverage universe,” MoffettNathanson analysts wrote this week.

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Also, via The Hollywood Reporter:

Shari Redstone Pushing for New Board at CBS (Report)

There are no active talks to merge the companies as of the moment.

If the board of directors at CBS isn't keen on merging the company with Viacom, then some of the directors apparently need to be replaced.

At least that's what Shari Redstone might be advocating, The Wall Street Journal reported on Wednesday.

Redstone and her family control both Viacom and CBS through their large stake in National Amusements, and insiders say she's been getting serious about her desire to see the two media companies combined again, as they were prior to splitting Viacom in two back in 2005.

CBS CEO Les Moonves and some others on the board, though, have been resisting, and CBS investors appear to be siding with them. On Wednesday, for example, Viacom shares jumped 4 percent at the prospect of a new merger-friendly board at CBS, while shares of CBS fell 2 percent.

Rumors that CBS will merge with Viacom pop up often, most recently last week, though by Monday it appeared to Wall Street that there was nothing concrete in the works, which removed a catalyst for Viacom's long-suffering stock to move higher.

On Tuesday, in fact, Rosenblatt Securities analyst Alan Gould lowered his rating on Viacom stock to "sell" based on his opinion that it won't merge with CBS anytime soon, while he reiterated a "buy" recommendation on CBS. The analyst says CBS would make a better partner with Verizon, among others, than it would with Viacom.

While insiders tell The Hollywood Reporter that there are no active talks to merge Viacom and CBS right now, the Journal says that Redstone reached out to Moonves earlier this month to request that he start negotiating as early as this quarter.

Investors on both sides appear to be clamoring for something dramatic to happen, as shares of both Viacom and CBS trade for less than they did a year ago even as the stock market in general has been on a powerful bull run.

Plus, AT&T's pending acquisition of Time Warner and Disney's pending acquisition of most of 21st Century Fox has Wall Street presuming that media companies need to grow bigger, quickly, through acquisition, if they're to remain competitive.

CBS had no comment, and Viacom was not available for comment.

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Also, from Variety:

Revival of CBS-Viacom Merger Talk Sows Tension Within Redstone Empire, Again

Chatter about Shari Redstone revving up an effort to recombine Viacom and CBS Corp. is sowing tension within both companies.

CBS insiders were aghast at a report in the Wall Street Journal Wednesday citing Redstone’s concern about a lack of long-term strategic planning at the Eye and the level of independence among its board members.

Meanwhile, Viacom executives are once again nervous about the potential for consolidation with CBS to bring wholesale changes to the management of the company, particularly the cable networks division. The sentiment among insiders is that things have only just started to settle down after a year of turmoil in 2016, before Bob Bakish was named permanent CEO in December of that year.

“Here we go again,” said an executive at Viacom’s MTV Networks.

Sources at both companies expressed surprise and frustration that the first stirrings of a re-merger effort are emerging through media reports rather than through the board room. A rep for Redstone declined to comment.


Redstone, who is vice chairman of Viacom and CBS, went public with her desire for the companies to reunite in the fall of 2016 but ultimately backed down after pushback from both boards on questions of price and governance. At that time, Viacom was on the ropes after a months-long legal battle between controlling shareholder Sumner Redstone, Shari Redstone and former Viacom CEO Philippe Dauman.

CBS and Viacom were first brought together by Sumner Redstone in 2000. But six years later, the mogul opted to re-divide the companies into separate entities. At the time, Redstone said he thought it would help both companies realize their true valuation from the market. Shari Redstone is on record as having opposed the split back in 2005.

The $52.4 billion deal unveiled last month by Disney to acquire 21st Century Fox has quickly heightened pressure on smaller media conglomerates like CBS Corp. and Viacom to bulk up or be seen as a takeover target. The Redstones’ tight control of CBS and Viacom has frustrated past efforts for CBS Corp. chairman-CEO Leslie Moonves to engage in merger conversations with prospective partners such as Time Warner, Lionsgate and more recently, Verizon.

It’s understood that Shari Redstone has insisted Viacom be part of any M&A conversations involving CBS. That’s a big hurdle for suitors who might be interested in CBS’ broadcast assets and its vast library of TV shows.

Viacom’s biggest drawback is its reliance on the MTV Networks division as its engine of earnings and profits. Not only are the core Viacom cablers (MTV, Nickelodeon, Comedy Central) facing ratings challenges, as is every other traditional TV outlet, but it’s clear that Viacom will have to shed some of its lower-profile channels in the coming years. How to put a price on those lesser channels today, given their steadily diminishing value, was a big part of the obstacle to re-merger discussions in 2016.

The coolness from top brass at CBS to a deal with Viacom has been palpable. It’s seen as a rescue effort for Viacom, which is still battling tough forecasts of declining affiliate and advertising revenue for its cable networks in the coming years. Viacom is also still in the early stages of a management turnover at Paramount Pictures, which hemorrhaged red ink during the previous three years.

CBS, on the other hand, has ridden the boom in content licensing to a series of record quarters. In March 2016, CBS laid out a five-year strategic plan at a daylong investor presentation in which it cited content licensing, international expansion, retransmission consent revenue, and new streaming platforms including CBS All Access and Showtime as pillars of its growth plan.

The Eye committed at that presentation to deliver 8 million OTT subscribers by 2020; last August, Moonves said CBS All Access and Showtime’s standalone streaming service were more than halfway to that goal. Retrans revenue, a big driver of profits, is projected to hit $2.5 billion annually by 2020.

On the international front, CBS has expanded Showtime’s reach in key foreign markets for the first time during the past two years, and it also swooped in on the fire sale of Australia’s Network Ten in November.

The level of detail that CBS laid out in 2016 and the progress reports delivered since then were cited by multiple CBS sources who were outraged by the reference to a lack of long-term planning in the Journal report, which cited multiple sources familiar with Redstone’s thinking.

The reported drive by Redstone to find replacements for some of CBS’ board members also rankled insiders, given the prominence of independent directors such as former Bank of America chairman Charles Gifford, former senator and Defense Secretary William Cohen, former NAACP president Bruce Gordon, and Harvard Law School dean Martha Minow. CBS typically holds its annual meeting in May. It’s unclear how many directors will be up for re-election at that time.

Sources said there is consternation within CBS over fears that tension between Moonves and Redstone could be destabilizing overall for the company. Sources close to the situation said that as of Wednesday, there have been no formal steps to initiate merger talks between the two boards.

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Also, from Deadline:

Wall Street Has Mixed Response To Word Of Renewed Viacom-CBS Talks

UPDATED at 2:20 pm: Investor reaction has been mixed this afternoon to renewed speculation that CBS and Viacom are about to recombine.

A Wall Street Journal report this afternoon confirmed a story late last week that the former corporate siblings were again exploring a merger. An hour before the close of trading today, Viacom shares are up 2% to $31.96, given the perceived benefits of tying a cable-bundle-dependent company to the No. 1 broadcaster.

The two companies merged in 1999 in a then-momentous transaction, before parting ways in 2006. They had previously explored coming together again before abandoning plans in 2016. Given the Disney-Fox deal, AT&T’s pending takeover of Time Warner and a host of others, the urgency is growing for next-tier players to gain scale.


Sources said CBS Chief Executive Leslie Moonves had been deeply skeptical in 2016 about the value of the combining the broadcaster, which was thriving, with the struggling Viacom. And Viacom was optimistic about its prospects under the new leadership of Robert Bakish.

But the media landscape has shifted substantially since then.

“It’s ludicrous to thinking CBS and Viacom can be stand-alone companies,” said BTIG’s veteran media analyst Richard Greenfield. “It’s 18 months delayed for no reason other than Les Moonves’ obstinance. That’s what stopped this deal. In a world where Disney and Fox are merging, his obstinance no longer matters.:

What does matter, in the current climate, is scale. Content companies need a stronger balance sheet, in order to pursue sports, or need to amass a more content for an over-the-top service. CBS’s streaming service would be bolstered by Viacom’s wealth of children’s programming through Nickelodeon, Greenfield notes, not to mention Paramount’s film library.

According to the Journal, Shari Redstone is the chief proponent of the idea. She contacted CBS CEO Leslie Moonves, who previously had resisted the notion, to renew discussions about merging the broadcaster with Viacom.

The Redstone family controls CBS and Viacom through their holding company, National Amusements.

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Also, from Reuters UK:

Exclusive - Viacom, CBS CEOs discuss potential merger: sources

(Reuters) - Viacom Inc Chief Executive Bob Bakish and CBS Corp CEO Leslie Moonves have had an exploratory discussion about merging the two media companies, sources familiar with the situation told Reuters on Thursday.

The discussion is a potential first step toward a recombination of CBS and Viacom. The boards of both companies have regularly scheduled meetings in the next several weeks and are expected to discuss the potential merger, the sources said.

The discussion between Bakish and Moonves, which took place earlier this month, was preliminary and no decisions have been made, but it signals that Moonves, who has had reservations about a potential deal between the companies, could be more open to the idea.

The sources wished to remain anonymous because they are not permitted to speak to the media. Viacom and CBS declined to comment. A spokeswoman for Shari Redstone declined to comment.

CBS and Viacom explored and decided against a merger in 2016, at the urging of its controlling shareholders, ailing 94 year-old media mogul Sumner Redstone and his daughter Shari Redstone. Those merger talks failed due to concerns by CBS’ directors and Moonves over the financial sense for CBS shareholders and governance issues.

Shari Redstone has continued to discuss with executives at both companies her desire to merge the two, which has gained steam since Walt Disney Co announced in December it would acquire a majority of Twenty-First Century Fox Inc’s assets, sources have told Reuters.

A combined company with CBS, which owns cable networks including Showtime as well as the CBS TV Network and CBS TV Studios, and Viacom, whose businesses include Paramount Pictures, Comedy Central, Nickelodeon and MTV, would have more negotiating leverage with cable and satellite companies.

“Scale matters now and is going to continue to matter in the future,” Shari Redstone told an audience at a luncheon at the Paley Center for Media in New York City last fall when asked about a potential CBS merger.

In a world with video streaming service Netflix Inc, which has a market capitalization of $113 billion and is dominating the media landscape, there is more pressure than ever on CBS and Viacom to merge, said Rich Greenfield, an analyst at BTIG.

CBS and Viacom combined would have a market value of more than $37 billion.

“There is an urgent need for scale,” he said. “And both companies are facing challenges that a combination could help address,” Greenfield said. “It is eat or be eaten.”

Bakish is expected to have a senior role at the combined company if the two companies agree to a merger, sources said.

Since he took over Viacom in late 2016, Bakish, 54, has improved relations with distributors, found financing for Paramount Pictures after Chinese investors dropped out and shuffled programming.

Even so, Viacom’s stock has been trading around $33 a share, below the $35 to $38.80 range it was trading at when it and CBS explored a merger in late 2016.

Viacom shares were last up 1.8 percent in afternoon trade. CBS shares were up 0.5 percent.

--Ends--

Also, from Variety:

CBS Corp. and Viacom Inch Closer to Formal Merger Discussions

CBS Corp. and Viacom are inching toward formally exploring a corporate reunion of the two halves of the Redstone media empire.

There is less opposition within CBS Corp. this time around compared to the last attempt by CBS/Viacom vice chairman Shari Redstone to bring the two companies back together in the fall of 2016. The early rumblings are that CBS would acquire Viacom in an all-stock transaction.

There are still big hurdles to clear in terms of valuation for Viacom, given the systemic concerns around its lower-profile U.S. cable networks, but there is also an understanding that the media landscape is changing fast and the potential for the two sides to work together on international growth initiatives provides rationale for a reunion. Viacom’s share price has also tumbled further during the past year, making a deal more attractive on a financial basis for CBS shareholders. As of Thursday, Viacom had a market cap of $13.8 billion, with shares closing at $33.61. CBS is valued at $22.7 billion, with shares closing at $59.27.


Sources close to the situation emphasize that neither side has yet engaged bankers or advisers to hammer out an agreement. But CBS Corp. CEO Leslie Moonves and Viacom CEO Bob Bakish have had at least one discussion about the possibility of merging, according to a Reuters report Thursday.

Media reports earlier this month that Redstone was poised to nudge the two companies into merger discussions raised some hackles at both companies. But after the emotions settled, the positive attributes of a reunified company are said to have become clearer for both camps. It’s understood that Moonves would run the combined operation with Bakish serving as a key corporate lieutenant. In 2016, the merger discussions initiated by National Amusements, the Redstone family holding company, came before Bakish was appointed as permanent CEO and Viacom was still reeling from the public legal battle between the Redstones and former Viacom CEO Philippe Dauman.

CBS and Viacom were first brought together in 2000 by Sumner Redstone, now chairman emeritus of both firms. The two were split up again in January 2006 out of Sumner Redstone’s frustration with a sagging stock price.

Moonves and Bakish have had a cordial relationship over the years. The two came to know each other after Viacom acquired CBS in 2000, when Bakish was running Viacom’s international channels division.

CBS’ management team has had a storied run of maintaining its status as the nation’s most-watched network, building Showtime into a major player, expanding its TV production activity, and diving into the OTT arena with CBS All Access. The expectation is that a recombined CBS and Viacom would have a stronger balance sheet to compete for talent, M&A opportunities, and for the pricey sports rights that have been crucial to CBS’ ability to wring top dollar out of MVPDs in retransmission consent deals.

For CBS, access to Viacom’s Paramount Pictures unit would help CBS’ Showtime pay cable network. The general streamlining of overlapping operations could yield savings of as much as $500 million, according to analyst Michael Nathanson of MoffettNathanson.

The downside for CBS is that the enlarged company would be the antithesis of the strategy that the Eye has touted to investors for years. CBS Corp. and its handful of channels anchored by the mothership broadcast network has been able to command top dollar from MVPDs in retrans and carriage agreements because it has been able to drive hard bargains for two must-have channels: CBS and Showtime. Adding Viacom’s 25 domestic cable channels would change the dynamic of discussions with traditional and upstart MVPDs considerably.

Under Bakish, however, Viacom has taken big steps to channel most of its programming resources into six flagship cable brands — Nickelodeon, MTV, VH1, BET, Comedy Central and Paramount Network (the rebranded Spike TV that debuted last week). Undoubtedly, it is only a matter of time before Viacom begins to shutter some of its lesser channels which are already losing distribution as MVPDs take a harder line in dealmaking and consumers embrace skinnier, cheaper bundles.

A deal between CBS and Viacom would also remove a hurdle to future M&A activity. It’s understood that the Redstones had previously balked at dealmaking opportunities involving CBS Corp. unless Viacom was also in the mix.

Reps for CBS, Viacom, and Shari Redstone declined to comment. The companies will likely have to acknowledge the brewing discussions by the time that both report earnings for the fourth quarter of 2017. Viacom is up first on Feb. 8, followed by CBS on Feb. 15.

--Ends--

Update - From Reuters UK:

CBS board to discuss potential Viacom merger on Thursday: sources

CBS Corp’s board is expected to discuss a merger with Viacom Inc on Thursday, sources told Reuters, a move that could begin a formal process to reunite the companies split by controlling shareholder Sumner Redstone more than a decade ago.

The board will need to decide if the deal is now attractive enough to CBS shareholders to overshadow concerns that scuttled a proposed tie-up pushed by Sumner and his daughter Shari Redstone in 2016.

The CBS board meeting is regularly scheduled and no announcement may come out of it, said the sources, who wished to remain anonymous because they are not permitted to speak to the media.

Viacom and CBS spokespeople declined to comment.

Viacom Chief Executive Bob Bakish and CBS CEO Leslie Moonves talked about the potential merger earlier this month, Reuters reported.

Viacom’s Nickelodeon and MTV networks and Paramount films could help broadcast-focused CBS’ All Access streaming service become more competitive, and the combined company could also better negotiate with cable and satellite distributors.

“They might be better able to develop more robust OTT offerings faster as a combined entity,” said Michael Nathanson, analyst with Moffett Nathanson, referring to “over the top” streaming.

Some could argue Viacom’s international presence is now more important for CBS given the rapid decline in U.S. cable subscriptions, some analysts have noted.

Walt Disney Co’s recent deal to buy Twenty-First Century Fox Inc assets has stoked a fresh push from Shari Redstone to rejoin the companies her father split in 2006.

Bakish has improved distributor relations, found financing for Paramount Pictures after Chinese investors dropped out and shuffled programming since taking over Viacom in late 2016.

But Viacom shares trade around $33, below a $35 to $38.80 range when the merger was last on the table, potentially making a deal more feasible.

CBS and Viacom last explored merging at the urging of ailing media mogul Sumner Redstone, 94, and Shari Redstone, who control both through privately held National Amusements.

Moonves and CBS’ board had concerns over corporate governance and the deal’s financial rationale, and the Redstones called off the effort in December 2016.

For CBS, which owns the CBS network, local broadcasters and Showtime, taking on cable networks could mean a difficult integration and tough negotiations, said Tim Nollen, analyst with Macquarie Research.

Merging for size alone may not make sense in the long term, and CBS could be better off on its own, some analysts cautioned.

Viacom shares were down 0.4 percent in afternoon trade. CBS shares fell 1.8 percent.

--Ends--

Also, from Reuters UK:

CBS, Viacom form special committees to explore merger

CBS Corp and Viacom Inc have formed special committees to explore a merger, the companies said on Thursday, the first step in potentially reuniting the companies split by media mogul Sumner Redstone more than a decade ago.

In separate statements, each company said that there is no assurance that the process will result in a transaction, and they would not comment further until the process is completed.

The companies had previously explored a merger in 2016 at the urging of ailing 94-year-old Sumner Redstone and his daughter Shari, who control CBS and Viacom through privately held National Amusements Inc.

Those talks failed due to concerns by CBS’ directors and Moonves over governance issues and the deal’s financial sense for CBS shareholders.

But Shari Redstone has continued to discuss with executives at both companies her desire to merge the two, which intensified after Walt Disney Co announced in December it would buy a majority of Twenty-First Century Fox Inc’s assets, sources have said.

“National Amusements supports the processes announced by CBS and Viacom to evaluate a combination of the two companies, which we believe has the potential to drive significant, long-term shareholder value,” the company said in a statement.

CBS Chief Executive Leslie Moonves and Viacom CEO Bob Bakish held discussions in January about a potential deal. The boards of both companies decided on Thursday to begin a formal process to explore the deal through special committees.

The deal would pair CBS’s broadcast network, television studios and Showtime cable network with Viacom’s Paramount Pictures, Comedy Central, Nickelodeon and MTV.

That could help CBS’ streaming service compete with Netflix Inc and boost the combined company’s leverage with cable and satellite distributors.

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Also, from the LA Times:

CBS, Viacom boards form exploratory committees to evaluate a merger

CBS Corp. and Viacom Inc.'s boards each have formed special committees to evaluate whether a merger of the two companies would benefit shareholders.

CBS' decision came Thursday during a board meeting, an important first step in a process that could result in the reunification of CBS and Viacom.

Within a few minutes of CBS' announcing its move, Viacom separately released a statement saying that its board had taken the same step.

Viacom's board has "established a special committee of independent directors to evaluate a potential combination with CBS Corp.," the company said in a statement. "The committee has retained independent legal counsel and is retaining independent financial advisors in connection with this evaluation."

The two companies are controlled by the Sumner Redstone family. Shari Redstone, daughter of the ailing 94-year-old mogul and vice chairperson of both companies, favors the consolidation. Redstone and her family, through its holding company, National Amusements, control nearly 80% of the voting shares of the two companies.

However, the special committees will be composed of independent shareholders who must weigh whether a transaction would benefit all shareholders.

"National Amusements supports the processes announced by CBS and Viacom to evaluate a combination of the two companies, which we believe has the potential to drive significant, long-term shareholder value," the firm said in a statement. "National Amusements does not currently intend to make any further comments regarding the process."

It's unclear who would run the combined company, if the merger comes together. Although CBS Chief Executive Leslie Moonves has a strong track record managing CBS, Redstone might instead favor Bob Bakish, the executive she tapped to be chief executive of Viacom nearly 14 months ago.

CBS and Viacom are both medium-sized companies in a rapidly changing landscape where huge conglomerates, such as AT&T and the Walt Disney Co., are trying to scoop up media companies to better compete against internet giants Google, Apple, Facebook, Netflix and Amazon.com. Viacom owns MTV, VH1, Comedy Central, Nickelodeon and the Paramount Pictures movie studio.

CBS, which owns the CBS television network, TV stations and Showtime, is the stronger of the two companies. Wall Street values CBS at $22.5 billion. Its stock closed up 2.3% to $58.93 on Thursday.

Viacom, which has a market capitalization of $13.6 billion, has been trying to overcome management missteps, including a lack of investment in television programming, an uneven strategy for online distribution and consistently poor-performing movies at Paramount Pictures. Viacom also blundered by buying back its stock at inflated prices.

Viacom shares on Thursday closed down less than 1%, or 21 cents, to $33.21.

The two firms, both based in New York City, were part of the same company until 2006, when Sumner Redstone separated them because he believed that Viacom with its then-powerful portfolio of cable channels would be a growth stock. The more sturdy CBS was expected to pay investors a healthy dividend.

But the television landscape has dramatically shifted since then. CBS has been able to boost its value on the strength of its programming. The company has substantially increased revenue through the fees it charges cable and satellite television distributors who want to include CBS in their pay-TV bundle.

At the same time, Viacom has seen its revenue shrink. As its networks have grappled with lower ratings, Viacom has come under pressure from Charter Communications and other cable providers to reduce its carriage fees.

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Also, from Variety:

CBS, Viacom Move Toward Merger Talks as Boards Begin to Evaluate Possible Deal

CBS Corp. and Viacom have taken the first steps toward negotiating a merger as both companies have established special board committees to evaluate a possibility of a deal.

CBS said Thursday its board has assembled a committee of independent directors to “evaluate a potential combination with Viacom Inc.” Viacom said it has “retained independent legal counsel and is retaining independent financial advisors in connection with this evaluation.”

The news came after a regularly scheduled CBS board meeting was held Thursday afternoon.

“There can be no assurance that this process will result in a transaction or on what terms any transaction may occur. Neither CBS nor the committee intends to comment further, until the process is completed,” CBS said in a statement. Viacom’s board issued the same statement.


National Amusements, the parent company of CBS and Viacom, endorsed the moves with a statement of its own. National Amusements president Shari Redstone, who is vice chairman of CBS and Viacom, has urged the companies to consider a reunion, given the pressure in the media landscape by M&A among its traditional rivals — Disney’s acquisition of most of 21st Century Fox and AT&T’s effort to buy up Time Warner — and the entry into the content arena by digital and tech behemoths with extremely deep pockets.

“National Amusements supports the processes announced by CBS and Viacom to evaluate a combination of the two companies, which we believe has the potential to drive significant, long-term shareholder value. National Amusements does not currently intend to make any further comments regarding the process,” the company said.

The statements mark the latest sign that the reunion of the two companies is in the offing. There are still big hurdles to clear in terms of valuation of a deal, given the systemic concerns around the diminishing value of Viacom lower-profile U.S. cable networks. But there is also an understanding that the media landscape is changing fast and the potential for the two sides to work together on international growth initiatives provides rationale for a reunion. Viacom’s share price has also tumbled further during the past year, making a deal more attractive on a financial basis for CBS shareholders. As of Thursday, Viacom had a market cap of $13.6 billion, with shares closing at $33.21. CBS is valued at $22.5 billion, with shares closing at $58.93.

There’s speculation that the deal would be structured as an all-stock transaction with CBS acquiring Viacom. Share prices for both companies were up in after-hours trading following the board announcements.

CBS and Viacom were first brought together in 2000 by Sumner Redstone, now chairman emeritus of both firms. The two were split up again in January 2006 out of Sumner Redstone’s frustration with a sagging stock price.

During the past 14 months under CEO Bob Bakish, however, Viacom has taken big steps to channel most of its programming resources into six flagship cable brands — Nickelodeon, MTV, VH1, BET, Comedy Central, and Paramount Network (the rebranded Spike TV that debuted last week). Undoubtedly, it is only a matter of time before Viacom begins to shutter some of its lesser channels which are already losing distribution as MVPDs take a harder line in dealmaking and consumers embrace skinnier, cheaper bundles. CBS Corp. chief Leslie Moonves has been vocal to investors about the importance of CBS focusing on a few must-have channels in MVPD negotiations rather than having to fight for carriage of lesser outlets.

A deal between CBS and Viacom would also remove a hurdle to future M&A activity. It’s understood that the Redstones had previously balked at dealmaking opportunities involving CBS Corp. unless Viacom was also in the mix. CBS is known to have had merger discussions with Verizon in recent months.

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Also, from the Wall Street Journal:

CBS and Viacom, After 12 Years Apart, Again Explore Deal to Recombine

Shari Redstone, who with her father Sumner Redstone controls both companies, believes they need greater scale to compete

CBS Corp. and Viacom Inc. said Thursday that their boards have formed special committees to evaluate a potential merger, a deal that would reunite the two big pieces of the Redstone family’s media empire.

Shari Redstone, vice chairman of both companies, is pushing for a merger, people close to the discussions say. She, along with her 94 year-old father, Sumner Redstone, controls CBS and Viacom, with a roughly 80% controlling stake in each company through their holding company National Amusements Inc.

This is the second time in less than two years that Ms. Redstone has tried to get CBS and Viacom back together, after they split up in 2006.

Ms. Redstone believes both companies need greater scale to better compete against bigger rivals, people familiar with her thinking say. The new push comes as AT&T Inc. tries to acquire Time Warner Inc. and Walt Disney Co. has a pending deal to purchase the majority of 21st Century Fox ’s entertainment assets.

CBS Chief Executive Leslie Moonves has previously resisted attempts to merge with Viacom and people close to him say he is wary of the combination.

In a statement, National Amusements said it supports the moves by CBS and Viacom to explore the deal, “which we believe has the potential to drive significant, long-term shareholder value.”

CBS and Viacom said in statements they wouldn’t comment further on the matter.

Ms. Redstone took pole position in the family empire in 2016 after a power struggle in which Viacom’s earlier management team was ousted.

Now she faces the challenge of setting up both companies for the future, especially Viacom, owner of more than two dozen cable channels including MTV, Nickelodeon and Comedy Central and the Paramount Pictures studio. Viacom was especially hard hit in recent years as young viewers migrated away from its networks.

Merging with CBS is a tempting solution: It would help shore up Viacom’s balance sheet and combine its channels with a valuable portfolio that includes prime-time CBS programming, sports content such as NFL football and the premium cable channel Showtime.

Ms. Redstone reached out to with Mr. Moonves last month to make the case for restarting merger talks, people familiar with the situation said. Ms. Redstone also began pressing for new blood on CBS’s board, the people said.

CBS isn’t opposed to growing, but it isn’t yet convinced that Viacom’s assets are the best path to scale, a person familiar with Mr. Moonves’s thinking said.

Viacom Chief Executive Robert Bakish, meanwhile, has been attempting a turnaround there. When Mr. Bakish was named chief executive just over a year ago, the company was losing revenue, its debt was teetering on junk status, its channels were losing audience and its Paramount studio had just lost nearly half a billion dollars in a single year.

He has tried to right the ship by improving relations with Viacom’s distribution partners, slimming the company’s strategic focus to six flagship cable channel brands, starting a digital content studio and improving collaboration between divisions.

Under Mr. Bakish, Viacom has maintained its cable channel-carriage agreements but it has been forced in some cases to accept lower fees, hurting the long-term outlook for its distribution revenue.

Analysts think Viacom would have greater leverage to negotiate with distributors if it were part of CBS. MoffettNathanson analyst Michael Nathanson said a deal also could offer “substantial cost synergies.”

Others counter that in this case bigger may not be better. “We do not view ‘scale’ as an all-encompassing positive—especially when ‘scale’ just means slapping two completely different companies together just to get bigger,” said Wells Fargo analyst Marci Ryvicker in a recent note.

Both Viacom and CBS had fallen short of analysts’ initial expectations for profitability in 2017—although Viacom fared much worse than CBS—and the pressure to consolidate has only increased, people close to the situation say.


Ms. Redstone believes Mr. Bakish would make sense as Mr. Moonves’s eventual successor at a merged company, the people familiar with the matter said.

Inside CBS, Chief Operating Officer Joe Ianniello is seen as Mr. Moonves’s successor and has a clause in his contract allowing him to leave at the end of this year if he isn’t named president or if someone else is named president or chief executive, according to a regulatory filing.

Mr. Moonves, who is well-regarded by Wall Street, has a few cards to play against Ms. Redstone if he ultimately isn’t convinced that a merger is the right move. According to his contract, he can leave for “good reason” if a non-executive chairman is appointed, or if the board “ceases to consist of ‘original independent directors’ and ‘qualified replacement directors.’ ”

Ms. Ryvicker said in her report that a departure by Mr. Moonves would weigh on CBS shares.

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Originally published: Saturday, January 13, 2018.

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