Merger would be difficult
Dauman in direct conflict with the company’s controlling shareholders.
An activist investor who has been critical of Viacom management turned up the heat, saying Dauman should be tossed out. “We think the ideal next CEO of Viacom should be Leslie Moonves of CBS,” said Eric Jackson, a managing director of Spring Owl Asset Management, which has been demanding management changes. “It’s in the best interests of both Viacom and CBS shareholders to see a remerging of those two companies under the leadership of Moonves.”
Moonves declined to comment.
Redstone’s representatives hinted that change was afoot.
“Sumner Redstone will make every decision with the same deliberation and consideration with which he removed Philippe Dauman and George Abrams as trustees, based on the best interests of shareholders,” Redstone’s newly hired spokesman, Mike Lawrence, said in a statement.
A Massachusetts judge has scheduled a hearing June 7 to wade into the dispute over whether Dauman and Abrams should be restored as trustees and remain on the board of National Amusements, the Redstone family’s investment vehicle.
Viacom shares gained 4%, or $1.71 a share, to $44.24 on Friday. CBS shares closed up 1%, or 52 cents, to $54.87.
Rejoining the two companies would result in a more powerful conglomerate that would allow Viacom to better compete with the likes of the Walt Disney Co., Comcast Corp.’s NBCUniversal and 21st Century Fox.
Brian Wieser, a media analyst at Pivotal Reseach, said there was some merit in merging Viacom and CBS — if CBS’ management, directors and shareholders were interested in such an arrangement. “There would be tons of synergies,” he said.
CBS boasts the nation’s most-watched network, with TV sports and news, one of the nation’s largest chains of TV stations, premium cable channel Showtime and the Simon & Schuster book publishing house.
Viacom has a different set of assets, with its profits coming from its stable of cable TV channels, including MTV, VH1, Comedy Central, Nickelodeon and BET. It also owns the struggling studio Paramount Pictures, responsible for such big franchises as “Star Trek,” “Mission: Impossible” and “Teenage Mutant Ninja Turtles.”
When Redstone was preparing to split his corporate empire into two companies in late 2005, there was squabbling over the assets each executive would be given. At the time, MTV architect Tom Freston was running Viacom, although he was forced out in September 2006 — nine months after Viacom became a standalone operation.
Dauman, a longtime Redstone advisor, quickly stepped into the CEO position.
A decade ago, Redstone refused to give Moonves the Paramount movie studio, but Moonves snagged two other lucrative Viacom assets that have gone on to pay dividends. One was Paramount Television, which included a library of old TV shows such as “Cheers” and “Star Trek.” Moonves renamed the unit CBS TV Studios.
Moonves also picked up the premium pay channel Showtime, which has increased the number of subscribers in recent years, with such programs as “Homeland,” “Shameless” and “Masters of Sex.”
In the last three years, as the value of TV content has increased, Viacom’s Paramount has begun to ramp up a new television studio, under the Paramount brand. This year, Viacom’s Paramount TV co-produced a live production of the Paramount movie “Grease,” which scored big ratings for Fox.
But CBS already has a formidable TV production studio that produces more than two dozen prime-time shows, including “Jane the Virgin,” “Blue Bloods,” “Hawaii Five-0” and “Crazy ExGirlfriend.” CBS also has a 50% interest in the CW television network and small film studio.
Some of Viacom’s TV channels, such as TV Land and Spike, would complement CBS’ offerings, and give CBS’ TV studio more distribution outlets for its shows, analysts said. But it is unclear whether Moonves or CBS’ board — which must look out for the interests of CBS shareholders — would favor such a merger.
“I’m not so sure that CBS shareholders want Viacom back,” Wieser said.
Stitching the two companies together would be complicated. One obstacle would be coming up with a valuation for Viacom that would be acceptable to Viacom shareholders — and not too steep of a price that would cause CBS shareholders to cry foul. Viacom is valued at $17.5 billion.
The two companies would have a delicate balancing act because the board of National Amusements would be on both sides of the deal, media insiders said.
Swallowing a company as large as Viacom would not be easy for CBS, which is among the smallest of the major media firms.