UPDATED with closing stock prices. Shares of CBS slipped 2% after early gains and Viacom’s dropped 5% Monday as investors reacted to word that the companies were near the finish line in their merger negotiations.
The boards of both companies worked through the weekend to hammer out terms of their long-expected reunion, with the amount of stock being exchanged between the companies remaining the main sticking point. The companies earlier had reached significant clarity about the management structure, agreeing that current Viacom CEO Bob Bakish would run the combined company, with acting CBS chief Joe Ianniello in a top role.
Sources familiar with the talks say a deal is likely to be announced this week, though they cautioned that it would still be possible for negotiations to end without a final resolution. This is the third round of formal merger discussions since 2016.
Viacom, whose stock closed at $28.53 Monday, has a market value of about $12 billion. CBS, which finished the day at $47.91, has a value in the $18 billion range. Accordingly, the terms being worked out in recent days have had CBS giving a bit less than two-thirds of a share for each full non-voting share of Viacom. Shares of both companies are controlled by National Amusements.
Television dominates the business activities of both CBS and Viacom, but the final-stage negotiations took place on a weekend when films released by the companies captured two of the top four spots at the domestic box office. Paramount’s Dora and the Lost City of Gold took fourth place with a $17 million opening weekend, and CBS Films’ Scary Stories to Tell in the Dark finished No. 2 with $20.8 million.
CBS shares have had a volatile couple of years, but are up 7% in 2019 to date as the company has grown more stable. Ianniello replaced longtime CEO Les Moonves last September after Moonves was accused of sexual assault and harassment by more than a dozen women. Viacom’s stock price has risen 12% for the year thus far, as investors have started to recognize Bakish’s turnaround efforts at the company after a genuine crisis in the middle of this decade. Its cable networks at that time were fading fast and the corporate suite was a nest of intrigue with Sumner Redstone, the 96-year-old architect and then-chairman of the company, in open warfare against his former protégé, CEO Philippe Dauman.
The merger joins two longtime media powers, putting Paramount Pictures, the CBS broadcast network and cable assets like Showtime and Nickelodeon under the same corporate roof. It also is likely to position National Amusements chief Shari Redstone in a seat of increased power, a noteworthy perch for a female executive. The tangible effect of the deal on the industry, though, is likely to differ substantially from the Disney-Fox and AT&T-Time Warner shock waves that have brought thousands of layoffs and re-ordered the Hollywood cosmos.
Viacom and CBS have minimal overlap in their operations, with Wall Street analysts identifying at most $500 million in cost savings, largely in administrative and back-office areas. Also, while certainly more of a force together than apart, CBS and Viacom together are still a fraction of the size of top media rivals like Disney and Comcast, which in turn are many times smaller than the tech giants invading their turf. Even so, in the U.S. TV advertising market, the combined CBS and Viacom will become the No. 2 player, after Comcast.
In 2006, when the companies split, CBS shares were worth an adjusted $26, while Viacom traded at $41.50. Sumner Redstone initiated the breakup because he believed high-flying Viacom was constrained by CBS, whose broadcast portfolio seemed the more sluggish of the two. It turned out the roles were reversed, with CBS riding its top-rated broadcast network, retransmission consent revenue and improved Showtime premium network to better stock-market performance overall than Viacom’s.
Reps from CBS, Viacom and National Amusements declined to comment when contacted by Deadline.