The media mogul, whose family holds controlling interest in both companies, has been advocating for the Viacom executive to play a senior role in the combined companies. CBS has been insistent that its executive team, led by CEO Leslie Moonves, run the show.
Reuters reports that Redstone dropped her request that Bakish serve as Moonves’ second-in-command, as long as he sits on the combined companies’ board. A source close to CBS said that proposal does little to advance merger talks, expressing doubts that the deal would happen.
“We need to be able to run this company independently and autonomously and this does not do that,” said one source, who requested anonymity.
The network is bargaining from a position of strength. CBS is coming off record first-quarter earnings, in which it exceeded Wall Street’s expectations. During yesterday’s call with investors, Moonves talked about how “the strategy we have laid out for you is clearly working,” which seemed a veiled criticism of the shotgun wedding.
Media analyst Michael Nathanson described CBS as being stuck in limbo.
“While a merger with Viacom would certainly be accretive, a combination would confuse the narrative that CBS has preached over the years: that its two main networks are well-positioned for an increasingly skinny bundle and direct-to-consumer world,” wrote Nathanson.
Little about the underlying fundamentals that prompted Redstone to advocate for the deal — a consolidating media landscape, increasingly dominated by technology giants — has changed.
Redstone reportedly offered the concession in a meeting this week with Moonves that included former Time Warner Inc. CEO Richard Parsons, a recently joined the CBS board.
Investors reacted enthusiastically to the reports. Viacom’s stock closed up 4% at $35.20 a share, and CBS’ rose 9% on the day’s trading to $53.17.
Cowen & Co. analyst Doug Creutz wrote, following the CBS earnings call, that he remains optimistic that the Viacom situation will be resolved.
“We think there are scenarios where a Viacom combination could be advantageous to CBS shareholders, given cost synergies and the potential for better management,” Creutz noted. “However we believe the benefits of such a deal remain highly dependent on price and Les Moonves remaining the CEO.”
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