CBS to merge with Viacom in $11.7 billion deal

Brenda Watkins
August 14, 2019

CBS ($CBS) and Viacom ($VIA) announced they reached an agreement to merge, with Viacom shareholders receiving almost 0.6 CBS shares for each Viacom share they own.

Combined revenue of ViacomCBS will be $28 billion in revenue and will hold the largest market share, 22%, of American television viewership, the two companies said in a statement. The $6-a-month service now has a new "Star Trek" series, a revival of "The Twilight Zone" and archives of old and current broadcast shows.

The deal should be completed by the end of this year. By combining, the companies say they will save $500 million a year. That's far less than the 60 million US subscribers that Netflix has, though it's comparable with the estimated number of subscribers to HBO Now, that network's stand-alone streaming service. Previous merger talks had failed because of clashes between executives over divvying up top jobs and the companies' relative valuation.

Each Viacom Class A voting share and Viacom Class B non-voting share will convert into 0.59625 of a Class A voting share and Class B non-voting share of CBS, respectively, the companies said.

"CBS's and Paramount's production asset will quickly move up the ranks to challenge the big boys of Disney, Comcast, AT&T and Netflix, and will be an attractive home for creative talent", they said.

Moody's media analyst Neil Begley said ViacomCBS might have to consider other acquisitions to keep up.

CBS and Viacom have had an on-again, off-again relationship.

Both CBS Corp. and Viacom have always been controlled by Sumner Redstone, 96, and more recently his daughter, Shari, 65, through their family's privately owned company, National Amusements, which operates movie theaters in the USA, United Kingdom and Latin America.

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In her Sumner Redstone biography "The King of Content", Keach Hagey describes Shari Redstone as "her father's daughter: doggedly determined, shrewd, and not particularly patient".

But over time, the two companies' fates were reversed.

CBS has been weighing its next moves since the ouster of longtime CEO Les Moonves previous year.

A recombination makes sense now because media companies are bulking up their content offerings to better compete for ad dollars.

Since that time, CBS stock has more than doubled in value, trading at almost $50 a share this week, while Viacom stock has stayed more or less flat, trading at almost $30 a share Tuesday. But Moonves was ousted a year ago, which reportedly opened the way for serious pro-merger discussion to continue.

While another acquisition could come later, the CBS-Viacom deal has always been Shari Redstone's top priority. Redstone had pushed for the merger for some years, and is expected to be named as the new company's chairwoman of the board, according to the Wall Street Journal.

Deadline brings word about the long-discussed merger, which results in what board chair Shari Redstone called "a world-class, multiplatform media organization that is well-positioned for growth in a rapidly transforming industry".

Under the all-stock transaction in the latest tie-up, existing CBS shareholders will own 61 percent of the company, while Viacom shareholders will own 39 percent.

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