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CBS, Viacom To (Re)Merge

O

Oscar Madison

WSJ: "Sumner Redstone’s National Amusements Inc. on Thursday publicly called for the boards of the companies it controls— Viacom Inc. and CBS Corp. —to explore a reunion of the media giants, arguing that a combined company could better tackle shifting consumer trends."
http://www.wsj.com/articles/redston...r-1475151461?mod=pls_whats_news_us_business_f

Viacom owns Paramount Pictures, MTV, Comedy Central, TVLand and Nickelodeon (among others). Viacom started as the syndication arm of CBS and was spun-off. Viacom, then controlled by National Amusements, acquired CBS in 1999 and merged operations. The two were split six years later, both controlled by National Amusements. National Amusements CEO Sumner Redstone sought to keep "slow growth" broadcast properties from dragging down "fast growth" properties, and to avoid conflict between the CEO's appointed to each company. Sumner Redstone is now ailing and his daughter appears trying to reverse the separation. CBS has already announced its plans to divest its radio holdings.
 
Maybe. Maybe not. There are lots of issues, as I pointed out yesterday:

The real bad news is the $12 billion in debt that Viacom has. That's BILLION, in a company that has a market cap of $14 billion. How did they get so much debt? I can't see CBS paying a lot if they have to absorb that much debt. When they split, it was all done with stock. Perhaps that's what they do this time. But now that Viacom stock is selling at $15 lower than CBS, Viacom stockholders might get 3/4 a share of CBS for every share they have of Viacom. Plus assumption of debt. If you're Sumner, and you own controlling shares in each company, what do you do?
 
TheBigA said:
Maybe. Maybe not. There are lots of issues, as I pointed out yesterday:

The real bad news is the $12 billion in debt that Viacom has. That's BILLION, in a company that has a market cap of $14 billion. How did they get so much debt? I can't see CBS paying a lot if they have to absorb that much debt. When they split, it was all done with stock. Perhaps that's what they do this time. But now that Viacom stock is selling at $15 lower than CBS, Viacom stockholders might get 3/4 a share of CBS for every share they have of Viacom. Plus assumption of debt. If you're Sumner, and you own controlling shares in each company, what do you do?
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So what? NA controls both companies. Daddy Redstone is out. Daughter Redstone now runs the show. Both boards are puppets. We've already seen Big Fish stockholders don't care what happens to Little Fish.
 
Oscar Madison said:
So what? NA controls both companies. Daddy Redstone is out. Daughter Redstone now runs the show. Both boards are puppets. We've already seen Big Fish stockholders don't care what happens to Little Fish.
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It's more complicated than that. How does the debt situation play out with the radio spin-off at the same time? CBS has a market cap of $24 billion, so they're the big fish here. Moonves is obviously jockeying for more than just the Chairmanship.
 
Shari Redstone is the Big Fish now. Les Moonves could well end up in the unemployment line, right behind fellow "indispensable genius" Roger Ailes. New generations take over and things change. And when Moonves hits the pavement, look for his wife to follow shortly.
 
Oscar Madison said:
Shari Redstone is the Big Fish now. Les Moonves could well end up in the unemployment line, right behind fellow "indispensable genius" Roger Ailes. New generations take over and things change. And when Moonves hits the pavement, look for his wife to follow shortly.
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Shari Redstone is big-picture, not he day-to-day operator Moonves is. Moonves would seem to be a key part to Redstone's plan.
 
DavidEduardo said:
Moonves would seem to be a key part to Redstone's plan.
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I agree, and he has studio experience from Warner Brothers, so he could be the key to fixing Paramount. He has also demonstrated his skills with investors at CBS.

Clearly Wall Street is greeting this news positively. Viacom stock is now up $2 to $42.63 since this article came out.
 
It's not a good idea. CBS needs to be able to source content from a broad range of providers, not be influenced to prop up content from Viacom's other properties. CBS has done well since the split, Viacom has not. The only group that would benefit would be the investment banks that would get a fee from such a transaction.
 
umfan said:
It's not a good idea. CBS needs to be able to source content from a broad range of providers, not be influenced to prop up content from Viacom's other properties. CBS has done well since the split, Viacom has not. The only group that would benefit would be the investment banks that would get a fee from such a transaction.
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CBS is already doing it, favoring properties they own and dumping those they don't (Exhibit A: Person of Interest). Being co-owned with a movie studio does not necessarily shut out other production companies. Non-Disney shows are on ABC and Disney shows are on other networks. Same for non-Universal shows on NBC and Universal shows on other networks. And Fox. And CBS and Paramount when the two were under the same corporate umbrella previously. The people in charge of network programming and the people in charge of selling shows to networks are looking out for their own departments' interests and looking to make the best deals (and get the best numbers) they can. Loyalty to a conglomerate is not how corporate types operate (and if they should, it's a great way to get the Justice Department in gear).
 
I don't see why a re-unfication of the two companies wouldn't hurt. Funny how things change in 10 years. Now it's CBS that's undervalue with a decent flow of cash, and Viacom is the one that's struggling. I'm for it if for no other reason than it would help the Star Trek franchise in terms of both promotion and distribution. If Les Moonves comes in and either takes over, or hires someone to take over the Paramount Pictures group and turn it around, it would be great for the film business. Right now, they're in the same boat as they are in the mid-1960's when they were struggling to find consistent hits. Goes to show the loss of Marvel films and the Indiana Jones franchise does make a difference in terms of both profit and gain. As for the MTV Networks, I don't really see much value because of the lack of appeal the average consumer now has for Cable TV. Even though cutting the cord is still a small deal, it's definitely effecting the bottom line. Especially with channels that are a waste of space (VH-1).
 
Oscar Madison said:
Except for Ms. Redstone and she holds the controlling interest.
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Of course she knows; she is on the Board of Directors and that is where the idea of a merger was presented prior to this step.
 
Exactly. Her idea. And she's got the votes. She owns the votes. It's like an election with Daley in Chicago, Tweed in New York, Pendergast in KC or Penrose in Philly. Corporate voting is about as Democratic as North Korea. If other shareholders don't like it, they can sell.

Whether or not putting Viacom back together again is a good idea, Shari seems to have something to prove to Daddy.
 
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