Things have moved quickly since Sunday’s ouster of chairman and CEO Les Moonves due to allegations of sexual misconduct. The terms of his exit and the settlement of dueling lawsuits between CBS and controlling shareholder National Amusements stipulate that NAI can’t move to merge CBS and Viacom for two years. But the companies’ boards could independently pursue deals, and CBS is finishing a bumpy 2018 as the potential belle of the M&A ball.
“While we are hard-pressed to name the buyer and NAI still has voting rights to approve any deal, CBS should likely trade higher as the rumor mill heats up,” Nathanson wrote in his report. “Stranger things have happened.”
Despite reservations about exposure to advertising and declines in the traditional television business, Nathanson raised his 12-month price target to $65 from $58, maintaining a neutral rating on the stock.
Viacom, of course, remains the most likely merger partner, but Nathanson said the remaking of the CBS board augurs well for terms of such a deal, which had been fiercely resisted by Moonves and his allies for years.
“The cooling off of a forced Viacom-CBS merger by NAI will accrue to the benefit of CBS shareholders,” the analyst added. “Any delay in consummating that marriage will give the CBS board more insight into the future slope of Viacom’s long-term affiliate fee growth. Post that, we would expect Viacom to return to the CBS board with a share exchange merger plan rich in cost savings opportunities. At that point, we would expect Viacom and CBS to finally consummate their long-anticipated marriage at terms that are more favorable to CBS than earlier.”
Nathanson’s report assesses the feasibility of the various other media and telecom companies making a play for CBS, but concludes that the timing is off for all of them. Disney, Fox and Comcast already have broadcast networks. Discovery is managing the debt it took on to pull off its acquisition of Scripps Networks Interactive. Verizon is focusing on 5G and wireless efforts, while AT&T still has its government lawsuit to fight. And in terms of the tech giants, “we don’t see any FAANG name chasing old media assets,” Nathanson added.
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