Ending years of fitful discussions that played out against a backdrop of operatic corporate drama and media industry consolidation, CBS and Viacom have finally agreed to merge. The deal reunites them and pools assets such as Paramount Pictures, CBS, Showtime and MTV in a new entity to be called ViacomCBS Inc. after 13 years of the two operating in largely separate media domains.
Under the all-stock deal, Viacom shareholders will get 0.59625 CBS shares for each non-voting share they own, which is an exchange ratio a bit below Viacom’s closing price last Friday. Regulatory approval of the merger is expected in the next several months.
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The fair market value of the tie-up as of today is about $30 billion. The combined annual revenue of the new company is $28 billion.
Bob Bakish, who has guided Viacom’s progress since taking over as CEO in 2016, will lead the combined entity as president and CEO. Joe Ianniello, interim CEO of CBS since September 2018, will stay on as chairman and CEO of CBS, overseeing all CBS assets.
Christina Spade, who had been CFO of CBS since last fall, will be EVP and Chief Financial Officer; and Christa D’Alimonte will be EVP, General Counsel and Secretary.
The new company’s board of directors will have 13 members. Six will be independent members from CBS, four will be independent members from Viacom, another will be the president and CEO of ViacomCBS and two will be picked by National Amusements (NAI), the longtime controlling shareholder of CBS and Viacom. NAI chief Shari Redstone will be board chair. Strauss Zelnick, who had been interim chair, announced months ago he did not intend to stay in the mix beyond his interim tenure.
For Redstone, the deal is a vindication of her instinct to reunite the companies and comes after a lengthy period of difficulty at each company and at times with her father, Sumner Redstone. Now 96 and in failing health, Redstone retains the title of chairman emeritus of the empire he built from a handful of Massachusetts movie theaters.
The younger Redstone now occupies a rare position of power and equity ownership for a woman in the entertainment industry.
“I am really excited to see these two great companies come together so that they can realize the incredible power of their combined assets,” she said in the official announcement. “My father once said ‘content is king,’ and never has that been more true than today. Through CBS and Viacom’s shared passion for premium content and innovation, we will establish a world-class, multiplatform media organization that is well-positioned for growth in a rapidly transforming industry. Led by a talented leadership team that is excited by the future, ViacomCBS’s success will be underpinned by a commitment to strong values and a culture that empowers our exceptional people at all levels of the organization.”
“Today marks an important day for CBS and Viacom, as we unite our complementary assets and capabilities and become one of only a few companies with the breadth and depth of content and reach to shape the future of our industry,” Bakish said. “Our unique ability to produce premium and popular content for global audiences at scale – for our own platforms and for our partners around the world – will enable us to maximize our business for today, while positioning us to lead for years to come.”
Ianniello said the merger “brings an exciting new set of opportunities to both companies. At CBS, we have outstanding momentum right now – creatively and operationally – and Viacom’s portfolio will help accelerate that progress. I look forward to all we will do together as we build on our ongoing success. And personally, I am pleased to remain focused on CBS’s top priority – continuing our transformation into a global, multiplatform, premium content company.”
The transaction combines assets of the 92-year-old CBS, including its flagship broadcast network, local TV stations, premium network Showtime and publishing house Simon & Schuster, with Viacom’s Paramount Pictures, MTV and Nickelodeon. As the streaming wars intensify between traditional media and tech giants Netflix and Amazon, the combined CBS-Viacom offers a notable mix of subscription and advertising-supported streaming services. CBS launched CBS All Access and Showtime’s over-the-top (OTT) platforms in 2015. Earlier this year, Viacom acquired Pluto TV, a leading ad-supported VOD service.
The drumbeat had been getting louder for a merger in recent weeks, and the conditions for an amicable arrangement proved more favorable. The boards of both companies held talks through last weekend in a final push. Fresh perspective may have helped: Most members of the CBS board joined as directors in the past year, disrupting years of stasis as the company sought to reset its culture and direction in the wake of former CEO Les Moonves’ ouster. The longtime mogul left under a dark cloud after allegations of sexual assault and harassment by more than a dozen women.
The two companies have held three rounds of formal merger talks in recent years, but the last two efforts ran aground because Moonves objected to the management structure and other issues. Tensions had grown between Moonves and Shari Redstone over the control of the company by National Amusements and NAI’s efforts to, in his view, force a stronger company to be tied to a weaker one, boiling over in the spring of 2018. CBS sued NAI, which responded with a lawsuit of its own. The case resulted in a settlement at the time of Moonves’ exit. The settlement banned NAI from initiating merger talks for two years, but did not prevent the individual companies from doing so.
CBS and Viacom split up in 2006, under the theory that more value would be unlocked by “freeing” Viacom from the then-sluggish, broadcast-heavy CBS shares. The roles soon reversed, however, with CBS riding its top-rated broadcast network, surging Showtime and growing distribution and licensing revenue to become the better-performing of the two stocks. Viacom’s cable-heavy set of assets, which minted money from the 1980s to the 2000s, began to hit turbulence this decade. Streaming, YouTube and social media carved into linear viewing of its once-invincible networks, hurting ad sales. Bakish’s predecessor, Philippe Dauman, took an extremely hard line with pay-TV operators, alienating many and jeopardizing carriage fees. One large cable company, Suddenlink (now part of Altice USA), balked at Viacom’s terms and kept its channels off its systems for two years.
Sumner Redstone, who once ran National Amusements with an iron hand, was succeeded by his daughter, Shari, several years ago and has been in poor health. Shari Redstone spoke out early and often in favor of bringing the companies back together and has also pursued talks with other companies who could, in turn, roll up a combined Viacom and CBS. That may well still be the plan, according to insiders, and rollups of smaller independents such as Lionsgate or MGM also are possibilities.
In the short term, the focus will be on integration and financial efficiencies. In Tuesday’s announcement, the company said it anticipates $500 million in cost savings from the deal, a figure that is notably less than the targets of mega-deals like Disney-Fox and AT&T-Time Warner. Accordingly, the CBS-Viacom combination is not likely to result in deep job cuts, though there is now overlap in many administrative areas.
Here is a timeline of key moments in the history of CBS and Viacom: