CBS And Viacom Finally Re-Tie The Knot, Merging After 13 Years As Separate Companies

CBS And Viacom Finally Re-Tie The Knot, Merging After 13 Years As Separate Companies

August 13, 2019

Ending years of fitful discussions that played out against a backdrop of operatic corporate drama and media industry consolidation, CBS and Viacom have finally agreed to merge. The deal reunites them and pools assets such as Paramount Pictures, CBS, Showtime and MTV in an entity to be called ViacomCBS after 13 years of the two operating in separate media domains.

Under the all-stock deal, Viacom shareholders will get 0.59625 CBS shares for each non-voting share they own, which is an exchange ratio a bit below Viacom’s closing price last Friday.

Bob Bakish, who has guided Viacom’s progress since taking over as CEO in 2016, will lead the combined entity as president and CEO. Joe Ianniello, interim CEO of CBS since September 2018, will stay on as Chairman and CEO of CBS, overseeing all CBS assets.

Christina Spade, who had been CFO of CBS since last fall, will be EVP and Chief Financial Officer; and Christa D’Alimonte as EVP, General Counsel and Secretary.

The new company’s board of directors will have 13 members: six independent members from CBS, four independent members from Viacom, the President and CEO of ViacomCBS and two National Amusements designees. Shari Redstone, head of NAI, will be chair.

For Redstone, the deal is a vindication of her instinct to reunite the companies and comes after a lengthy period of difficulty at each company and with her father, Sumner Redstone, who is now 96. She occupies a rare position of power and equity ownership for a woman in the entertainment industry. “I am really excited to see these two great companies come together so that they can realize the incredible power of their combined assets,” she said in the official announcement. “My father once said ‘content is king,’ and never has that been more true than today. Through CBS and Viacom’s shared passion for premium content and innovation, we will establish a world-class, multiplatform media organization that is well-positioned for growth in a rapidly transforming industry. Led by a talented leadership team that is excited by the future, ViacomCBS’s success will be underpinned by a commitment to strong values and a culture that empowers our exceptional people at all levels of the organization.”

“Today marks an important day for CBS and Viacom, as we unite our complementary assets
and capabilities and become one of only a few companies with the breadth and depth of content and reach to shape the future of our industry,” Bakish said. “Our unique ability to produce premium and popular content for global audiences at scale – for our own platforms and for our partners around the world – will enable us to maximize our business for today, while positioning us to lead for years to come.”

Ianniello said the merger “brings an exciting new set of opportunities to both companies. At CBS, we have outstanding momentum right now – creatively and operationally – and Viacom’s portfolio will
help accelerate that progress. I look forward to all we will do together as we build on our ongoing success. And personally, I am pleased to remain focused on CBS’s top priority – continuing our transformation into a global, multiplatform, premium content company.”

The transaction combines assets of the 92-year-old CBS, including its flagship broadcast network, local TV stations, premium network Showtime and publishing house Simon & Schuster, with Viacom’s Paramount Pictures, MTV and Nickelodeon. As the streaming wars intensify between traditional media and tech giants Netflix and Amazon, the combined CBS-Viacom offers a notable mix of subscription and advertising-supported streaming services. CBS launched CBS All Access and Showtime’s over-the-top (OTT) platforms in 2015. Earlier this year, Viacom acquired Pluto TV, a leading ad-supported VOD service.

The drumbeat had been getting louder for a merger in recent weeks, and the conditions for an amicable arrangement have grown more favorable. The boards of both companies held talks through last weekend in a final push. Fresh perspective may have helped: Most members of the CBS board joined as directors in the past year as the company looked to reset its culture and direction in the wake of former CEO Les Moonves’ ouster. The longtime mogul left under a dark cloud after allegations of sexual assault and harassment by more than a dozen women.

The two companies have held three rounds of formal merger talks in recent years, but the last two efforts ran aground because Moonves objected to the management structure and other issues. Tensions had grown so much between Moonves and Shari Redstone over the control of the company by National Amusements and NAI’s efforts to, in his view, force a stronger company to be tied to a weaker one, boiled over in the spring of 2018. CBS sued NAI, which responded with a lawsuit of its own. The case resulted in a settlement at the time of Moonves’ exit that banned NAI from initiating deal talks but did not prevent the individual companies from doing so.

CBS and Viacom split in 2006, under the theory that more value would be unlocked by “freeing” Viacom from the then-sluggish, broadcast-heavy CBS shares. The roles soon reversed, however, with CBS riding its top-rated broadcast network, surging Showtime and growing digital portfolio to become the better-performing of the two stocks. Viacom’s cable-heavy set of assets, which minted money from the 1980s to the 2000s, began to hit turbulence this decade. Streaming, YouTube and social media carved into linear viewing of its once-invincible networks, hurting ad sales. Bakish’s predecessor, Philippe Dauman, took an extremely hard line with pay-TV operators, alienating many and jeopardizing distribution revenue.

The companies’ 96-year-old chairman emeritus, Sumner Redstone, who once ran National Amusements with an iron hand, was succeeded by his daughter, Shari, several years ago and has been in poor health. Shari Redstone spoke out early and often in favor of bringing the companies back together and has also pursued talks with other companies who could, in turn, roll up a combined Viacom and CBS. That may well still be the plan, according to insiders, and rollups of smaller independents such as Lionsgate or MGM also are possibilities.

In the short term, the focus will be on integration and financial efficiencies. Wall Street analysts have forecast about $500 million in cost savings from the deal, which is notably less than mega-deals like Disney-Fox and AT&T-Time Warner. Accordingly, the CBS-Viacom combination won’t likely result in deep job cuts, though there is overlap in many administrative areas.

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