Proposal brings CBS and Viacom closer to merger

Media giants’ boards agree on structure for top management at a combined company.

CBS Corp. and Viacom Inc. moved a step closer to reuniting as the boards of the two entities have agreed on a top management structure for a combined company.

An agreement on the structure for senior management resolves a dilemma that vexed the two boards last year when they tried — but failed — to merge the media companies controlled by the Sumner Redstone family.

Under the proposed agreement, Viacom Chief Executive Bob Bakish would become the chief executive of the combined company, said a person familiar with the terms of the deal but who was not authorized to comment.

CBS’ acting chief executive, Joseph Ianniello, would become the leader of the CBS assets, which include the broadcast network, a chain of television stations and premium pay channel Showtime.

There would be no official No. 2 executive at a combined CBS-Viacom, the knowledgeable person said. However, CBS Chief Financial Officer Christina Spade is expected to become the CFO for the merged entity. Viacom’s No. 2 executive Wade Davis would probably depart.

Three people close to the situation cautioned Friday that the talks were still fluid and that there was no final agreement on the management structure. In addition, the two boards have not

agreed on valuations of the two companies.

CBS is valued at nearly $19 billion while Viacom has a market capitalization of $12. 2 billion.

Nonetheless, Wall Street expects a merger to take place and insiders say privately that a deal could be reached before Labor Day or even before Thursday when both companies report their earnings.

This is the third time in the last three years that the two New York-based companies have tried to merge.

The two entities were together until 2006, when Redstone cleaved his empire into two.

CBS is expected to absorb Viacom, which owns MTV, Nickelodeon, BET, Comedy Central and the Paramount Pictures movie studio in Hollywood.

CBS’ board has been largely reconstituted since last September, part of a larger pact that saw former CBS Chief Executive Leslie Moonves departing the company amid a growing sexual harassment scandal.

Until his departure, CBS’ independent shareholders were locked in a bitter legal dispute with the mogul’s daughter, Shari Redstone, who has stepped in to manage the family’s affairs given the poor health of her 96year-old father. Moonves had opposed merging with Viacom, fearing the stronger CBS would be weighed down by Viacom’s underperforming businesses.

Viacom, which used to be the leading cable programmer, has suffered from falling ratings and changing viewership patterns. Younger viewers are more likely to get their favorites shows on Netf lix or Hulu than on cable TV. CBS, too, has witnessed declines in its audience size, prompting the boards of both firms to reconsider a merger.

CBS’ board over the last nine months has concluded that it needs to fortify the legacy broadcaster for the digital age.

Though Viacom is less valuable than CBS, Bakish has long been seen by Wall Street as the leading contender to run a combined CBS-Viacom.

Shari Redstone picked Bakish as the CEO of Viacom in a corporate shakeup in 2016.

Since he took over that company, Bakish has made strides by bringing in new management at Paramount Pictures and hammering out key distribution deals with AT&T and Charter Communications and purchasing Pluto TV to fill a gap in Viacom’s streaming service strategy.

The Wall Street Journal first reported that a tentative deal had been reached on management structure.

CBS shares on Friday closed at $50.40 a share, down 22 cents. Viacom shares closed at $29.78, dropping 14 cents on a volatile day on Wall Street.

Under current discussions, CBS’ shareholders would make up nearly twothirds of the combined company while Viacom shareholders would make up a little more than a third, according to the knowledgeable person.

Notably, that was roughly the formula that was agreed on last year — but at that time, a Moonves-led CBS would not accept a management structure that included Bakish.