CBS CBS Corp

By Benjamin Mullin and Cara Lombardo 

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 (August 3, 2019).

CBS Corp. and Viacom Inc. have reached a working agreement on the management team that will lead the combined company in the event of a merger, people familiar with the matter said, resolving a critical question that threatened to stand in the way of a deal.

Bob Bakish, the chief executive of Viacom, will be CEO of the combined company, the people said. Joe Ianniello, the acting chief executive of CBS, will be offered a job overseeing all of CBS-branded assets at the combined company under the working agreement, they said.

Mr. Ianniello is well regarded by Wall Street and has been an advocate for CBS's direct-to-consumer streaming platforms, as well as playing a key role in driving up the distribution fees the company receives from cable and satellite operators. In addition, he has calmed the waters at CBS after the abrupt departure of longtime CEO Leslie Moonves, who was forced to step down in September after several women accused him of sexual harassment and assault.

The working agreement also calls for Christina Spade, the chief financial officer of CBS, to become chief financial officer of the combined company, they said.

CBS hasn't yet submitted a formal offer for Viacom, and negotiations are still fluid, some of the people said. The timing of the deal is still uncertain, but both companies are making progress, they said.

A deal could be announced before the end of the month, according to people familiar with the matter. Among the outstanding issues are the exchange ratio for the two companies and the composition of the board.

Mr. Bakish has long been considered the most likely candidate to helm the combined company, people familiar with the situation have said. He and Shari Redstone, whose family's holding company National Amusements Inc. controls both Viacom and CBS, have a good working relationship.

The working agreement for the management structure casts aside one of the biggest roadblocks that could have impeded a deal between the two sister companies. Ms. Redstone, who is vice chairman of both CBS and Viacom, believes the companies would be better positioned to compete with larger rivals as a merged entity.

Viacom has been the weaker of the two companies over the past several years, having suffered as cable-TV cord-cutting contributed to a decline in ratings for its major networks. A merger with CBS would give it 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.

This marks the third time in four years that directors at CBS and Viacom have explored a merger. The first 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 Ms. Redstone, her father Sumner Redstone 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: The two companies can merge if two-thirds of the board members at CBS not affiliated with National Amusements vote for it.

It is unclear whether Viacom Chief Financial Officer Wade Davis will remain at the combined company, given that the working agreement calls for there to be no chief operating officer role.

Mr. Davis is involved in setting Viacom's ad-sales strategy, and his portfolio includes Viacom's finances, corporate strategy, technology operations and the recently acquired direct-to-consumer video-streaming service Pluto TV.

The management structure under consideration would be a departure from the way both Viacom and CBS have been organized in the past, when the second-in-command has held the role of chief operating officer. Viacom's former chief operating officer, Thomas Dooley, served in that position from 2010 until 2016, when he was named interim CEO; he left later that year. Viacom doesn't currently have a chief operating officer.

Mr. Moonves ran CBS with a second-in-command, Mr. Ianniello, who was then chief operating officer. Mr. Ianniello became acting CEO in September after Mr. Moonves was forced to step down over sexual-harassment and assault accusations. Mr. Moonves has denied accusations of nonconsensual sexual relations.

The proposed structure doesn't preclude the possibility that Mr. Bakish will appoint an executive overseeing strategy after the merger is announced. Mr. Ianniello is eligible for a $70 million payout if he isn't named permanent CEO of CBS, according to his contract.

--Emily Glazer contributed to this article.

Write to Benjamin Mullin at Benjamin.Mullin@wsj.com and Cara Lombardo at cara.lombardo@wsj.com

(END) Dow Jones Newswires

August 03, 2019 02:47 ET (06:47 GMT)

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