Investors long ago factored in the expected reunion of CBS and Viacom to their valuation of the companies’ stock prices, so Wall Street’s reaction to the confirmation of the merger was understandably muted. CBS gained a bit less than 2% to finish the day at $48.81, while Viacom also climbed nearly 2% to close at $29.05.
Nevertheless, Bob Bakish, the Viacom CEO who will become CEO of ViacomCBS once the merger closes, stressed during a 40-minute investor call Tuesday that the reality of the deal transforms the operating environment. “It takes a big uncertainty off the company, which has been an overhang,” Bakish said. Both companies, he added, enter the marriage on an upswing. “One of the benefits is going to be the financial shape that we’re going to be in,” Bakish said. In one of the call’s many bursts of polysyllabic exuberance, he anointed the merged entity a “very strong, global, multiplatform premium content company.”
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CBS and Viacom are “two companies that don’t just share a common heritage but a common culture,” he said. “Together, we will do more than we could on our own. But it’s bigger than that because all of our stakeholders will benefit.”
Bakish was asked about a common theme of investor and media speculation — whether ViacomCBS will continue to pursue deals to increase scale. CBS held talks with Lionsgate about acquiring Starz, but talks broke off over price. Bakish did not address Starz but he said the plan will be to remain opportunistic. “Both of us continue to look at opportunities in the marketplace,” he said. “That’s something we are going to continue to do.” In terms of near-term needs, he added, “I don’t think there are any gaps per se.”
One M&A scenario, which did not come up on the call, is ViacomCBS in turn being acquired by a larger player seeking to fortify themselves against Disney, Comcast and AT&T, to say nothing of tech giants disrupting the entertainment game.
Executives said they expected the transaction to close by the end of 2019, subject to regulatory approval.
Joe Ianniello, the acting CEO of CBS who will remain in the new role of chairman and CEO of CBS, opened his scripted remarks on the call by saying he had gone back to study the expected benefits of the 1999 merger of CBS and Viacom. “I was amazed by how many of them apply today,” he said.
“As we recombine, I look forward to the ways we will continue to grow these companies in a world where scale gets more and more important all the time,” he added. Addressing his new role, which emphasizes oversight of the CBS network, stations and digital platforms while surrendering oversight of Showtime, Pop TV, Smithsonian and publisher Simon & Schuster to Bakish, he said, “I am excited to get even closer to the CBS operations I care so much about.”
Bakish, in a line seemingly designed to emphasize harmony in the new C-suite, noted that he and Ianniello have known each other as colleagues “for 20 years.”
Ianniello said affiliate revenue, direct-to-consumer opportunities with CBS All Access and Showtime as well as combined TV advertising are the three main drivers of the merger. “The reason to do this deal is that there are tremendous revenue synergies,” he said. Together, CBS and Viacom account for 22% of U.S. TV viewership, but collect just 11% of TV revenue. “That leaves significant upside we should be going after,” Ianniello said.
Bakish, who rose through the ranks on the international front at Viacom before becoming CEO in 2016, said the template for incorporating CBS and part-owned CW broadcast assets had been established before. He cited deals like adding broadcasters Channel 5 in the UK and Telefe in Argentina to the company’s pay-cable holdings. “I look at the U.S. as that on steroids,” he said.
Plugging Paramount-owned content into CBS All-Access represents a clear opportunity from the merger, he said. Asked if that would take time to execute, he said, “There’s nothing at all preventing us from moving forward with that opportunity in the very near future. … There’s some low-hanging fruit there that we will start to pick quite soon.”