CBS-Viacom merger talks get a lift

CBS Corp. stock surged Friday on strong earnings and speculation that controlling shareholder Shari Redstone had offered a compromise to try to nudge along the stalled merger talks with Viacom Inc.

CBS rose 9% to $53.17 a share on Friday after the company reported record revenue in the first quarter. Shares of Viacom, which owns MTV, Comedy Central, Nickelodeon, BET and the Paramount Pictures movie studio, climbed 3% to $30.29.

Reuters reported late Friday that Redstone was trying to fashion a compromise to win over CBS Chief Executive Leslie Moonves by dropping a demand that Viacom CEO Bob Bakish, 54, would have a prominent management role in the merged entity. Bakish’s role has been a major sticking point in talks to reunite the media companies.

However, Viacom and CBS are not close to a deal, according to three people close to the process who were not authorized to speak publicly about confidential negotiations. And it’s not clear Redstone’s concession will remove a key hurdle in the talks.

In recent weeks, negotiations have fallen apart over a valuation of Viacom, Redstone’s demands over who should run the combined company, and a reluctance by CBS to pair with the weaker Viacom.

Analysts have long been divided over whether a merger makes sense.

“We have always liked CBS as a standalone company,” Wells Fargo Securities analyst Marci Ryvicker wrote in a research report early Friday after CBS set a revenue record by raking in $3.76 billion during the first quarter, an increase of nearly 13% over the year-earlier period.

She and other analysts pointed to CBS’ solid earnings to support the company’s position that owning a bunch of cable TV channels might not be a winning strategy in an era of accelerating cord-cutting. Pay-TV companies have reported higher customer losses in the first quarter, and cable channels are most vulnerable to the changing landscape.