CBS CBS Corp

By Benjamin Mullin and Dana Cimilluca 

CBS Corp. and Viacom Inc. are in the final stages of negotiating a deal that would reunite mogul Sumner Redstone's media empire in the hopes of creating a more formidable competitor to the entertainment industry's giants.

The two sides are still working out details, including the stock exchange ratio for the transaction, but have narrowed it down to a range of between 0.59 and 0.60 CBS share for each Viacom share, according to people familiar with the matter. That ratio would value Viacom slightly below its market value as of Friday, which was about $12 billion. As a result, CBS shareholders would own more of the combined company than CBS's share price would imply.

The exchange ratio is crucial because it determines the price of a merger in an all-stock deal, such as the one under discussion between CBS and Viacom.

CBS shares were 1.8% lower in midday trading Monday, while Viacom shares fell 4.7%.

The last time the two companies explored a merger, CBS and Viacom discussed an exchange ratio of about 0.61. Those talks were derailed when CBS sued National Amusements Inc., which controls both CBS and Viacom. The two sides reached a settlement in September.

The deal, if completed, will bring under one roof such recognizable American media properties as Viacom cable channels like MTV and Nickelodeon, the Paramount film and TV studio and the CBS broadcast network.

There is still a chance that the price could fall outside that range or that the talks could break down, but the companies are hoping to announce an agreement as early as Monday, the people said.

Bob Bakish, the CEO of Viacom, is expected to run Viacom and CBS if the companies merge, The Wall Street Journal reported last week, according to people familiar with the matter. CBS acting Chief Executive Joe Ianniello is in line for a position at the combined company to run CBS-branded assets, which include the CBS broadcast network.

Shari Redstone, vice chairman of both companies, has said she believes that CBS and Viacom would be better positioned to compete with larger rivals as one company. She also is president of National Amusements.

A combined CBS and Viacom would still be relatively small compared to the reach of some of its competitors. Walt Disney Co. has a large library of iconic intellectual property, and Netflix has a head-start in the video streaming business, with more than 151 million subscribers globally. The company may have to expand, such as by buying additional companies, to compete with bigger players.

"This comes down, in my view, to what are management's ambitions for the future are," said Michael Nathanson, co-founder of boutique analysis firm Moffett Nathanson. "They have enough, together, to maintain CBS' ambitions of reaching 25 million direct-to-consumer subscribers by 2022. If they have a greater goal than that, than they probably do need to keep rolling up other assets."

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.

The merger, if it happens, will reverse a move, made in 2006, that cleaved Viacom's then-booming cable networks division from CBS's more mature TV business.

Write to Benjamin Mullin at Benjamin.Mullin@wsj.com and Dana Cimilluca at dana.cimilluca@wsj.com

(END) Dow Jones Newswires

August 12, 2019 13:54 ET (17:54 GMT)

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