CBS, Viacom in Final Stages of Deal Talks--3rd Update
August 12 2019 - 2:12PM
Dow Jones News
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.
National Amusements President Shari Redstone, who is vice
chairman of both CBS and Viacom, has said she believes the two
companies would be better positioned to compete with larger rivals
as one entity.
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 13:57 ET (17:57 GMT)
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