The latest wave to hit is a CNBC report that longtime CBS chairman and CEO Leslie Moonves could be forced out if the two former corporate siblings can’t come to terms on a re-merger. Shari Redstone, who runs controlling CBS and Viacom shareholder National Amusements, will also fire the entire CBS board in the event of a non-deal, CNBC said, citing unidentified sources. While those dramatic moves are difficult to imagine on an average day in the media business, these days have been anything but average for the two companies, whose fates have been closely intertwined over the past 20 years.
The report drew immediate responses from CBS and National Amusements, which is the controlling shareholder of CBS and Viacom. “The industry and the marketplace know Leslie Moonves’ record and we think it speaks for itself,” CBS said in its statement. National Amusements said it “has tremendous respect for Les Moonves and it has always been our intention that he run a combined company.”
Viacom did not comment.
The stocks of both companies have taken a hit today, though overall market declines are a major factor along with the merger atmosphere. CBS ended the trading day at $51.01, down about 2%, and Viacom was at $30.51, down almost 2% on the day.
The last phrase in the National Amusements statement — “a combined company” — remains a mirage for now, though as recently as last week most media and finance types took the re-merger as a given. The companies formed committees to explore getting back together, but negotiations are off to a bumpy start, especially in terms of management and the valuation of the two entities.
Today’s drama was preceded by a blistering research note put out yesterday by Bernstein analyst Todd Juenger. Labeling it an “arranged marriage,” he wondered whether the network would be pursuing the struggling Viacom at all if it weren’t for the intervention of Shari Redstone, who heads up National Amusements.
“We think a defining question for investors considering the pending CBS/Viacom nuptials is this: if CBS were an independent entity, would they be pursuing a bid for Viacom?” Juenger wrote. “If you believe, like we do, the answer to that question is ‘absolutely not,’ then how hard do you want to work to try and convince yourself this is good for CBS shareholders?”
CBS clearly views the deal as not a merger of equals. Its initial all-stock offer to acquire Viacom that pegged the company’s worth at below market value and proposed a management team for the combined entity that snubbed Bob Bakish, the Viacom chief executive attempting to effect a turn-around. Viacom countered this week with a proposal that calls on CBS to sweeten the deal.
There remain disagreements over executive leadership and the strange – or perhaps unprecedented — situation of Viacom claiming greater synergies through the combination than the buyer.
“CBS cannot fix Viacom’s core problems,” Juenger wrote. “Viewership of linear TV among young people, especially kids 2-11, continues to free-fall … Even MTV, the supposed turnaround proof point, has returned to decline for the past eight weeks.”
At least one prominent Wall Street figure thinks its possible for both parties to walk away from the bargaining table, as they did in 2016. Despite Redstone’s prodding, the two sides may not be able to arrive at a valuation for Viacom that avoids shareholder lawsuits (either CBS investors who might raise qualms about overpayment or Viacom’s shareholders might fee they’ve reaped too little reward).
CBS already has emerged as the belle of the OTT ball, with the highly rated broadcast network a must-carry for the new class of streaming TV services. And Bakish has put a plan in place to revitalize Viacom — indeed, Paramount Pictures had a triumph this weekend with A Quiet Place, a nearly dialog-free horror movie that opened to $50 million in domestic ticket sales.