By Benjamin Mullin and Keach Hagey
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (June 19, 2019).
CBS Corp. is preparing to make an offer for sister media company
Viacom Inc. in the coming weeks, following a meeting of CBS
directors last week in which a potential deal was discussed,
according to people familiar with the situation.
Representatives of CBS and Viacom have already had preliminary
discussions about the outlines of a deal, one of the people
said.
If the companies move ahead with talks, it would be a third
attempt to reunite the $30 billion media empire that was divided by
mogul Sumner Redstone more than 13 years ago.
A deal is far from certain. Determining the price for a stock
transaction -- which requires setting a value for the companies
relative to each other -- is one major hurdle.
Picking a new leadership team is another challenge. Viacom Chief
Executive Bob Bakish is widely believed by people close to the
process to be in pole position to become CEO of the combined
company. There is debate and discussion already about how the rest
of the management team would fill out, people familiar with the
situation said.
Shari Redstone, vice chairman of both companies, believes that
CBS and Viacom would be better positioned to compete with larger
rivals as one company. She is president of National Amusements
Inc., which controls both CBS and Viacom.
Viacom has been the weaker of the two companies over the past
several years, having suffered as cable-TV cord-cutting pulled down
ratings for its major networks. A merger with CBS would give Viacom
greater scale and more leverage in negotiations with advertisers
and cable-TV providers.
CBS, which has been propelled by sports and some broadcast-TV
hits, could stand to benefit from cable networks owned by Viacom
that reach younger audiences, such as Nickelodeon and MTV.
CBS has had challenges, too. The company has had an acting CEO,
Joseph Ianniello, since former Chief Executive Leslie Moonves was
forced to step down last year in response to allegations of sexual
assault and harassment. Mr. Moonves has denied the allegations.
CBS is also battling flagging ratings at its news division and
recently reshuffled the lineup of anchors at its flagship news
shows under new news president Susan Zirinsky.
Viacom's Paramount film studio could provide programming for
CBS's Showtime premium cable channel and its CBS All Access
subscription streaming-video service. And Viacom's library of film
and TV shows would give the combined company increased clout in a
streaming-video marketplace hungry for spinoffs and reboots of
popular franchises.
This marks the third time in four years that directors at CBS
and Viacom have explored a merger. The first merger attempt, in
late 2016, was called off due to a lack of enthusiasm on the part
of both companies. The second attempt, in 2018, culminated in a
shareholder lawsuit filed by CBS against the Redstones and National
Amusements, accusing them of breaching their fiduciary duties.
It concluded in a settlement that stipulated National Amusements
wouldn't propose a merger for roughly two years.
That doesn't preclude the possibility of a merger, however. The
two companies could merge if two-thirds of the board members at CBS
not affiliated with National Amusements vote for it.
Once, it seemed to many analysts and executives that CBS and
Viacom were better off apart. In 2006, seven years after Mr.
Redstone's Viacom paid $34.8 billion in stock to create a
then-unprecedented media behemoth, the stock of the combined
company had stagnated.
Mr. Redstone blessed a move that cleaved Viacom's then-booming
cable networks division from CBS's more mature broadcast and radio
businesses. The 2006 decision created two public companies that one
analyst dubbed "ViaGrow" and "ViaSlow." Mr. Bakish, then an
executive vice president at Viacom, endorsed the decision.
The media sector has changed drastically since then.
The biggest players, including Time Warner, NBCUniversal,
Discovery and Scripps Networks Interactive, have merged with rivals
or teamed up with companies in other sectors to create media giants
with greater scale in advertising and distribution deals.
Tech monoliths like Alphabet Inc.'s Google, Facebook Inc. and
Amazon.com Inc. have remade the media landscape, sucking up a
majority of the money spent on digital advertising. Netflix Inc.
and Apple Inc. are spending billions on video programming annually,
luring cord-cutters who have become disenchanted with the
traditional pay-TV bundle.
The traditional cable business, meanwhile, has reached its
twilight. For decades, programmers like Viacom could reliably
expect to emerge from carriage negotiations with cable companies
with fee increases in the single and double digits. Advertisers
clamored to purchase ad spots to market their products to tots
parked in front of Nickelodeon and generations of teenagers who
were raised on MTV.
Some TV programmers have now been forced to accept lower rates
during traditional carriage negotiations. Cable companies, beset by
cord-cutters, are loath to continue paying more money for content
that fewer Americans are tuning into on a regular basis.
CBS's television network, with owned stations and affiliates
broadcasting shows free across the country, is less susceptible to
cord-cutting. And CBS owns the rights to broadcast NFL games
through the 2022 football season, a valuable bargaining chip during
negotiations with pay-TV companies.
Write to Benjamin Mullin at Benjamin.Mullin@wsj.com and Keach
Hagey at keach.hagey@wsj.com
(END) Dow Jones Newswires
June 19, 2019 02:47 ET (06:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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