Viacom-CBS talks bog down over who would serve as No. 2 to
Leslie Moonves
By Keach Hagey and Joe Flint
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 (April 25, 2018).
When CBS Corp. Chief Executive Leslie Moonves, Viacom Inc. Chief
Executive Bob Bakish and their top lieutenants met in January over
deli sandwiches at CBS's Los Angeles offices to discuss merging
their companies, things started out cordially.
The two sides agreed on the strategic merits of a tie-up,
according to people familiar with the matter. But as the meal wore
on, it became clear that the fate of the deal would turn on one
question: What about Bob? That is, would Mr. Moonves accept Mr.
Bakish as his No. 2 and likely successor in a combined company?
Three months on, that remains the key impasse. People close to
both Viacom and Shari Redstone, the president of National
Amusements, the holding company that overwhelmingly controls both
companies, say there is little chance of a deal without a senior
role for Mr. Bakish.
People familiar with CBS's thinking are adamant he will have
none. Mr. Moonves is insisting that his longtime right-hand-man,
CBS Chief Operating Officer Joe Ianniello, be his No. 2. CBS also
worries that Mr. Bakish could be a proxy for Ms. Redstone to
influence the media assets her family controls, the people say.
Ms. Redstone handpicked Mr. Bakish, 54 years old, to run Viacom
after leading a power struggle that ousted his predecessor, and
they remain close, people familiar with their relationship say.
Mr. Moonves, 68, who was installed by Ms. Redstone's father,
Sumner Redstone, is regarded as one of the savviest operators in
the media industry. But Ms. Redstone wants a clear successor for
him and doesn't believe that Mr. Ianniello, who has never led a
public company, fits the bill, according to people familiar with
her thinking. Mr. Bakish has run Viacom for a little over a
year.
Ms. Redstone has begun to apply pressure on Mr. Moonves. She has
been interviewing potential new CBS board members, which would make
it easier for her to overhaul that board and oust Mr. Moonves,
according to people familiar with the matter. National Amusements
has nearly 80% voting stakes in both Viacom and CBS.
"It's almost going activist on a company you control," said one
person familiar with Ms. Redstone's thinking.
CBS recently said it was replacing board member Arnold Kopelson,
a movie producer, with former Time Warner Chief Executive Richard
Parsons . Mr. Parsons is expected to help Ms. Redstone and CBS find
additional CBS board members, according to people familiar with the
matter.
In an April 11 statement, National Amusements underscored its
"tremendous respect" for Mr. Moonves and expectation that he would
lead a combined company.
Forcing a marriage between Viacom and CBS isn't without risk for
Ms. Redstone and the value of her holdings. Since Jan. 11, the last
day before reports of renewed merger talks first surfaced, CBS's
market capitalization went from $22 billion to $19 billion, and
Viacom's has stayed at $12.7 billion. That has made finding a price
that's acceptable to both sets of shareholders all the more
difficult.
Investors will be seeking an update on the talks when Viacom
reports earnings on Wednesday.
The roots of the standoff date back to early this year, when Ms.
Redstone and Mr. Moonves sat down over a friendly meal in Los
Angeles to renew discussions about a Viacom-CBS merger, after a
failed attempt in 2016.
Ms. Redstone asked Mr. Moonves to find a position senior enough
to ensure Mr. Bakish would remain with the combined company. When
Mr. Moonves suggested Mr. Bakish could lead the international or
cable division of the merged company, Ms. Redstone pushed back,
according to people familiar with the matter.
Mr. Moonves neither agreed nor disagreed with Ms. Redstone's
proposal. She left believing they were on the same page, according
to people familiar with the matter.
During the chief executives' meal together, Mr. Bakish was
determined to avoid the topic of management, but Mr. Moonves
persuaded him and he relented.
"You can be CEO, and I can be president," Mr. Bakish said to Mr.
Moonves, according to people familiar with the meeting.
Leaning in toward Mr. Ianniello, who also was present, Mr.
Bakish added: "You might have a problem with that." Without missing
a beat, Mr. Ianniello replied, "You think?"
Over cookies and snacks in late March, Mr. Bakish and Viacom
Chief Financial Officer Wade Davis pitched CBS board members on
their vision for wringing $1 billion in synergies out of the
merger. The CBS directors later told their Viacom counterparts that
they were impressed by Mr. Bakish's presentation, according to
people close to Viacom.
So Viacom's camp and Ms. Redstone were shocked when CBS made an
initial offer on April 3 that carved out no role for Mr. Bakish,
according to people familiar with the matter. Viacom immediately
countered with a proposal that would name Mr. Bakish as Mr.
Moonves's No. 2 and give him broad responsibilities.
Under the Viacom proposal, Mr. Moonves would be in charge of
most of the current CBS assets as well as Viacom's Paramount
studio, while Mr. Bakish would be in charge of CBS's local stations
and the rest of Viacom's assets, as well as key functions like ad
sales, digital and international, according to people familiar with
the Viacom proposal.
That's a nonstarter for Mr. Moonves, according to people
familiar with the matter, as well as Mr. Ianniello, who has a
provision in his contract that says he can walk away with a $70
million payday if he isn't named Mr. Moonves's successor.
(END) Dow Jones Newswires
April 25, 2018 02:47 ET (06:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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