CBS and Viacom Set Merger, After 3 Years of On-and-Off Talks

Thirteen years after going their separate ways, CBS Corp. and Viacom are ready to reunite. Following a summer of talks, CBS and Viacom said today they have agreed to combine in an all-stock merger. The new company, ViacomCBS Inc., will have more than $28 billion in revenue. Viacom president and CEO Bob Bakish will lead ViacomCBS as president and CEO. Joe Ianniello, who has been acting CBS CEO since Les Moonves exited the company last September following more than a dozen accusations of sexual harassment and intimidation, will become chairman and CEO of CBS and oversee the CBS-branded assets in the combined company. CBS chief financial officer Christina Spade will continue in that role for the new company; in a memo to Viacom staff, Bakish said Viacom CFO Wade Davis will exit when the deal closes. “Today marks an important day for CBS and Viacom, as we unite our complementary assets and capabilities and become one of only a few companies with the breadth and depth of content and reach to shape the future of our industry,” Bakish said in a statement. “Our unique ability to produce premium and popular content for global audiences at scale—for our own platforms and for our partners around the world—will enable us to maximize our business for today, while positioning us to lead for years to come.” Added Ianniello in a statement: “This merger brings an exciting new set of opportunities to both companies. At CBS, we have outstanding momentum right now—creatively and operationally—and Viacom’s portfolio will help accelerate that progress. I look forward to all we will do together as we build on our ongoing success. And personally, I am pleased to remain focused on CBS’s top priority—continuing our transformation into a global, multiplatform, premium content company.” The combined company will include a broadcast network (CBS), a movie studio (Paramount), a premium cable network (Showtime), several basic cable networks (including MTV, Nickelodeon, Pop TV, Paramount Network, VH1, TV Land, BET and CMT) and a number of streaming services (including CBS All Access, Pluto TV, CBSN and the upcoming BET+). A CBS-Viacom union will give both companies scale at a time when most of their rivals have completed big mergers, including Disney-Fox, Discovery-Scripps and AT&T-TimeWarner (now WarnerMedia). In their announcement, the companies said ViacomCBS will have the largest share of U.S. TV audience (22%) among all media companies, and would also be on top in all major U.S. demos, including total audience, adults 18-49, adults 25-54 and kids 2-11. The CBS-Viacom union—which values Viacom at around $11 billion—will be of a smaller scale than other recent industry mega-mergers, such as Disney’s $71.3 billion purchase of 21st Century Fox in March and AT&T’s $85 billion acquisition of Time Warner in June 2018. It’s more along the lines of Discovery’s $14.6 billion purchase of Scripps in March 2018. Because of that, many observers expect that CBS-Viacom will ultimately look to merge with another company, like Discovery Inc., if it truly wants to hold its own with the likes of AT&T, Comcast and Disney. The merger should give the combined company a boost in the streaming space, which will become even more saturated in the next year with the introduction of new OTT services from Disney, WarnerMedia and NBCUniversal. But CBS All Access has a 5-year heard start on those streaming upstarts. The companies could use their combined libraries to bolster CBS All Access and Pluto TV, the ad-supported free streaming service that Viacom bought earlier this year to become the centerpiece of its streaming strategy, and give a boost to IP like Star Trek, which had been divvied up, with Viacom’s Paramount making movies, and CBS All Access creating several new Star Trek-themed series. As MoffettNathanson analyst Michael Nathanson wrote Friday in a note to investors, the new company “will create the second largest player in U.S. TV advertising, with strong linear reach and a growing digital footprint.” Also, “with broadcast assets in the U.K., Argentina and Australia and plans to launch new SVOD/AVOD services abroad, the new company will have a meaningful opportunity to grow their international footprint.” Reports first surfaced in June that CBS was preparing an offer to re-merge with Viacom. CBS and Viacom had hoped to conclude talks by last Thursday, when each company had held their quarterly earnings calls with investors. However, they weren’t able to cross the finish line in time, which led them to sidestep merger discussions during their respective earnings calls. This is the third time in the past three years that Viacom and CBS had discussed a merger. They initially split 13 years ago but first talked about reuniting in 2016 when chairman Sumner Redstone prevailed over former Viacom president and CEO Philippe Dauman after months of fighting over the future of Viacom. A CBS-Viacom merger, which seemed like a foregone conclusion for much of 2016, was put on hold in December of that year by National Amusements, which owns 80% of the voting shares of both Viacom and CBS. The companies again agreed to explore a merger in February 2018, but those talks derailed and resulted in CBS suing majority owners Sumner and Shari Redstone that May. Last September, just before their Oct. 3 court date, the companies reached a settlement on the same day former CBS Les Moonves exited the company. As part of that settlement, National Amusements agreed to not pursue a merger between CBS and Viacom for two years, but the CBS board, not National Amusements, initiated these most recent talks. Shari Redstone will be chair of ViacomCBS. Both companies completed their respective upfront negotiations this summer as reports mounted about a possible deal. CBS wrapped its upfront in June, while Viacom crossed the finish line earlier this month.