Media Moves

CBS, Viacom to merge

August 14, 2019

Posted by Irina Slav

CBS and Viacom have struck a deal to get back together to improve their position amid intensifying competition.

Kenneth Li had the news for Reuters:

CBS Corp (CBS.N) and Viacom Inc (VIAB.O) 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 in revenue.

CNN’s Oliver Darcy noted the deal was a personal victory for Shari Redstone:

Edmund Lee’s lead on the front of the Business Day section in Wednesday’s NYT: “Shari Redstone got her wish.”

The reunion of CBS and Viacom — to be known as ViacomCBS — “is a victory for Ms. Redstone, the leader of a family business that has led the two media giants for two decades,” Lee wrote. She had “pushed for a deal for at least three years but faced fierce opposition from CBS’s board, including its former chief executive, Leslie Moonves.” This time last year Moonves was fighting to save his job amid a sexual misconduct scandal. By September he was out of the picture. Now Redstone will be chair of the combined company.

Shares in both CBS and Viacom were up on Tuesday, reflective of a wider rally, after slipping on Monday. But “Wall Street has questions about the combined company’s operating structure and next steps,” Variety’s Brian Steinberg reports. Analysts are “not convinced the current management structure, which puts CBS CEO Joe Ianniello in charge of CBS-branded assets and makes Viacom CEO Bob Bakish the head of the whole company, will allow for maximizing assets. And they want more information on expected results from using the combined company to boost revenue from streaming-video and new kinds of data-and-technology-enabled advertising,” he writes.

Fortune’s Matthew Monks focused on the other participants in the deal that stand to benefit:

CBS and Viacom primarily relied on boutique investment banks to help put together their long-awaited $11.7 billion merger.

Centerview Partners Holdings and Lazard are advising CBS. Viacom’s bankers are LionTree Advisors and Morgan Stanley while National Amusements—the controlling shareholder of both companies—is being advised by Evercore, according to the deal announcement.

CBS’ advisers could share a pot of $25 million to $30 million in fees, according to estimates from consulting firm Freeman & Co. The advisers for Viacom could roughly split between $30 million to $40 million.

Liontree and Morgan Stanley are “both first class institutions,” Viacom Chief Executive Officer Robert Bakish said in an interview. “I know the principals on the deal extremely well and they did a phenomenal job.”

Boutique investment banks have fewer business lines and primarily sell advice to clients. While full-service investment banks such as Morgan Stanley, JPMorgan Chase & Co., and Goldman Sachs Group sell advice too, they are also more diversified. They help companies sell stocks and bonds, among other services.

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