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CBS CORPORATION

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CBS, Viacom reunite with plans for bigger role in streaming TV wars

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08/13/2019 | 06:42pm EDT
FILE PHOTO: Viacom International Media Networks President and CEO Bakish speaks at the Mobile World Congress in Barcelona

(Reuters) - CBS Corp and Viacom Inc have reached a deal to reunite media mogul Sumner Redstone's U.S. entertainment empire, betting that a larger company will be able to compete and partner better in a media industry dominated by giants.

The new company will be named ViacomCBS Inc, although CBS shareholders will own 61% and Viacom shareholders will own 39%.

The merger will combine the CBS television network, CBS News, Showtime cable networks with MTV Networks, Nickelodeon, Comedy Central and the Paramount movie studios. Together, they will own more than 140,000 TV episodes and 3,600 film titles. Annually, it is estimated to generate about $28 billion (£23.2 billion) in revenue.

It creates a company with roughly a $30 billion market value, which is still small compared with rivals including Netflix Inc, at $136 billion, ABC network owner Walt Disney Co, at $245 billion, and NBC owner Comcast Corp at $193 billion.

The merging companies are controlled by National Amusements Inc, the holding company owned by billionaire Sumner Redstone and his daughter, Shari.

"My father once said ‘content is king,’ and never has that been more true than today," Shari Redstone said in a statement.

The third attempt at a merger since 2016 is a decisive win for Shari Redstone, whose father built the companies through a series of mergers and then broke them apart 13 years ago.

Previous merger talks had failed because of clashes between executives over divvying up top jobs and the companies' relative valuation.

The recombination comes amid an increasingly competitive media landscape dominated by Disney and Netflix, prompting Redstone to pursue a merger.

Viacom Chief Executive Bob Bakish will be the president and CEO of the combined company. Joe Ianniello, interim CEO of CBS, will be named chairman and CEO of CBS, which will exclude the Showtime cable network and book publisher Simon & Schuster.

Ianniello will report to Bakish. Bakish cannot fire Ianniello unless the ViacomCBS board approves.

Bakish in an interview said that he will compete with Netflix, Disney and AT&T for subscribers and also create and sell TV shows and movies to other companies, an operation that will grow thanks to the new deal.

"This is not a put-your-eggs-in-one-basket story," Bakish said. "They all work together."

ViacomCBS can lure customers with free offerings from a service like PlutoTV, which it bought in January, then convince them to pay for a subscription service in another part of the empire like CBS All Access, Bakish said.

SLIGHT PREMIUM

Viacom shareholders will receive 0.59625 CBS shares for each share they own, representing a slight premium to Viacom's closing price on Monday.

The companies said they expected about $500 million in annual cost savings.

The new board of directors will consist of 13 members. Six will come from independent members from CBS, four independent members from Viacom, Bakish, and two National Amusements members. Shari Redstone will be appointed the chairman.

Shares of Viacom rose 2.4% to $29.21 and shares of CBS rose 1.4% to $48.70 after the merger was announced.

Centerview Partners LLC and Lazard Frères & Co served as financial advisers to the CBS board's special committee. Paul, Weiss, Rifkind, Wharton & Garrison LLP served as the special committee's legal counsel.

LionTree Advisors LLC and Morgan Stanley & Co served as financial advisers and Cravath, Swaine & Moore LLP as legal counsel to the special committee to the Viacom board.

Viacom was advised by Shearman & Sterling LLP. National Amusements was advised by Evercore as its financial adviser and by Cleary Gottlieb Steen & Hamilton LLP as its legal counsel.

(Reporting by Kenneth Li; Additional reporting by Helen Coster in New York and Supantha Mukherjee in Bengaluru; Editing by Saumyadeb Chakrabarty, Nick Zieminski and Lisa Shumaker)

By Kenneth Li

Stocks mentioned in the article
ChangeLast1st jan.
CBS CORPORATION 1.04% 43.8 Delayed Quote.-0.85%
COMCAST CORPORATION 1.96% 43.18 Delayed Quote.26.81%
NETFLIX 2.38% 302.8 Delayed Quote.13.13%
VIACOM 0.27% 26.02 Delayed Quote.1.25%
WALT DISNEY COMPANY (THE) 1.34% 135.2 Delayed Quote.21.67%
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Financials (USD)
Sales 2019 15 644 M
EBIT 2019 3 143 M
Net income 2019 2 843 M
Debt 2019 8 471 M
Yield 2019 1,74%
P/E ratio 2019 5,77x
P/E ratio 2020 6,85x
EV / Sales2019 1,59x
EV / Sales2020 1,48x
Capitalization 16 450 M
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Mean consensus OUTPERFORM
Number of Analysts 25
Average target price 59,83  $
Last Close Price 43,80  $
Spread / Highest target 75,8%
Spread / Average Target 36,6%
Spread / Lowest Target 5,02%
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Managers
NameTitle
Joseph R. Ianniello President & Chief Executive Officer
Strauss H. Zelnick Chairman
Christina Spade Chief Financial Officer & Executive Vice President
David F. Poltrack Chief Research Officer & President-CBS Vision
Douglas Rousso Chief Technology Officer
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