National Amusements Officially Asks CBS and Viacom to Consider Merging

Companies could recombine after splitting 10 years ago

The rumors floating around all year that CBS Corp. and Viacom might recombine 10 years after they split apart are no longer just rumors: National Amusements has sent a letter to both boards, asking them to consider a merger in what would be an all-stock deal.

National Amusements, which owns 80 percent of the voting shares of both Viacom and CBS, also said it won't accept or support a third party acquiring either company, nor any deal under which it would not control the merged company.

"We believe that a combination of CBS and Viacom might offer substantial synergies that would allow the combined company to respond even more aggressively and effectively to the challenges of the changing entertainment and media landscape," said the letter from National Amusements CEO Sumner Redstone and his daughter Shari, who is president.

"As a result, we would like both companies' boards to consider a potential combination of the companies. Our tentative view is that the optimal structure would be an all-stock transaction in which the stockholders of each company would receive shares in the combined company of the same class as they currently hold."

The letter continued, "We believe that any transaction should be the result of full and fair deliberation and negotiation, and that any transaction would proceed only if it is approved by each board. None of Sumner M. Redstone, Shari E. Redstone or David R. Andelman will vote as directors on the consideration of this matter by either company's board, and none will participate in any of the related deliberations."

Today's move has been expected since Redstone prevailed over former Viacom president and CEO Philippe Dauman, after months of fighting over the future of Viacom. That battle began in February, when Dauman was named executive chairman of Viacom, over the objections of Shari. The parties settled their differences in August, and Dauman agreed to depart as president and CEO of Viacom.

The 93-year-old Redstone remained with Viacom as chairman emeritus, while his daughter Shari Redstone stayed on as nonexecutive vice chair. COO Tom Dooley was named acting president and CEO of Viacom at the time, but last week he announced that he'll depart the company after Nov. 15.

Ten years ago, Viacom and CBS Corp. split into separate companies. Many analysts and investors have said this year that the beleaguered Viacom's best path to success lies in merging once again with CBS. CBS Corp. chairman and CEO Leslie Moonves, who has had smooth sailing at CBS, is expected to run both companies, though The Wall Street Journal reported this summer that at the time, he was not interested in that role.

At an investor conference two weeks ago, Moonves said there were no active talks between the two companies. "We are a standalone public company," Moonves said. "We're really happy with the hand we are playing."

But if National Amusements get its way, the deck is about to be reshuffled.