THE URGE TO MERGE
Shari Redstone presses CBS, Viacom on deal
Faced with turmoil in Viacom’s executive ranks and declining ratings and revenue at the media giant, Shari Redstone is looking to undo a 10year-old corporate split.
The controlling shareholder of Viacom and CBS, Redstone on Wednesday called on the boards of both companies to explore a reunion.
It was probably the last thing on CBS Chief Executive Les Moonves’ mind.
Redstone’s National Amusements Inc., which controls the family’s $40 billion media empire, sent a letter to the boards of both companies proposing a combination of the two.
The two companies formally split in January 2006.
The letter was expected to be discussed at a CBS board meeting Wednesday — while Viacom, not due to meet until October, is expected to discuss the proposal, sources said.
The idea of a reunion, if not pleasing to Moonves — who has consistently dismissed the idea — seemed to work for investors.
Shares of CBS gained 4 percent, to $54.15, on Wednesday — plus another 33 cents in after-hours trading.
Viacom shares added 3.1 percent, closing at $36.56. The parent company of Comedy Central, MTV and Paramount Pictures, Viacom gained another 1 percent in after-hours trading.
The two firms have been intense rivals for this past 10 years, with Moonves turning an expected “slow growth” CBS business into a powerhouse — thanks to distributors’ retransmission payments.
Viacom’s star, meanwhile, shone bright for most of the decade as it commanded huge fees from distributors in exchange for its outsized bundle of cable networks — but has largely lost investor confidence as youngsters have fled to social-media channels and TV viewers are shifting to smaller bundles.
Moonves, who many times has told Wall Street he is happy playing the hand he has and isn’t interested in re-hooking up with the corporate sibling, could wind up with a huge equity slice in a combined entity, sources said.
The move kicks off a new narrative after five months of paralysis.
An NAI-led corporate coup began in May with the ouster of Viacom CEO Philippe Dauman from the NAI board, the Sumner Redstone trust and, finally, from his Viacom gig.
Dauman collected $72 million on his way out the door. He was succeeded in the interim by Chief Operating Officer Tom Dooley — who then suddenly decided he would leave in mid-November.
Dooley will leave with $62 million in severance.
Meanwhile, sources said that Viacom has changed plans and will choose an internal candidate for CEO without performing an external search.
The possible candidates are: Chief Financial Officer Wade Davis, 44, who has been making the rounds in Hollywood to introduce himself, and Viacom veteran Bob Bakish, who heads international operations.
Michael Nathanson, of research firm MoffettNathanson, notes a merger of the two could produce synergies of $400 million.
“Even if the combined assets are put back together again, we still believe that it will take time to turn around Viacom’s underperforming cable networks and film studio,” he said.