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CBS Corp. and Viacom Inc. on Tuesday announced plans to reunite, marking the third attempt in as many years to combine the media companies controlled by the Redstone family to better compete with the entertainment world's behemoths.
The companies' boards reportedly worked through the weekend to seal the deal, which is set to bring together the most-watched broadcast network, CBS, with the Paramount Pictures film studio and a collection of cable TV networks, including Showtime, Comedy Central, MTV, Nickelodeon and BET.
The sides finally agreed on a price—Viacom shareholders will receive 0.59625 CBS shares for each share they own—clearing the final major hurdle to corporate reunification. Viacom has a market cap of $11.9 billion while the acquiring company, CBS, is valued at $18.3 billion; the combined company will have more than $28 billion in revenue.
"I am really excited to see these two great companies come together so that they can realize the incredible power of their combined assets," said Shari Redstone, who will become chair of the new ViacomCBS.
CBS and Viacom stock rose on the news, which was released late in the trading day Tuesday.
The merger realizes Redstone’s long-held goal of bringing together the companies, which her father, media mogul Sumner Redstone, broke apart in 2006. The first attempt, in 2016, failed because of tepid interest on the part of both companies. The second try, in 2018, culminated in a lawsuit filed by CBS seeking to block the deal.
Under a settlement last fall that resolved the CBS suit, board members affiliated with the Redstone family's investment vehicle, National Amusements, agreed not to raise the possibility of a merger between CBS and Viacom for two years. But that agreement did not preclude a business combination if two-thirds of the board members at CBS who are not affiliated with National Amusements supported taking such action.
Shari Redstone has argued that the media companies need to combine their resources to survive in a rapidly changing environment that’s dominated by colossuses like the Walt Disney Co., Comcast and Netflix and well-resourced tech newcomers like Google's YouTube.
Viacom and CBS laid out the strategic rationale for the merger on Tuesday, arguing that the bulked-up media company would be in better shape to survive the cable TV cord-cutting that has undermined the industry's economics, and to produce content for buyers like Netflix and Amazon.
The unified ViacomCBS would boast a portfolio of well-known entertainment brands—CBS, Showtime, Comedy Central and Nickelodeon—as well as a hefty library of 140,000 television episodes and 3,600 films and popular franchises such as Star Trek and Mission: Impossible.
This robust library, together with production facilities across five continents — will help fuel ViacomCBS' direct-to-consumer efforts through a portfolio of subscription and ad-supported streaming services, which include CBS All Access and Pluto TV, the companies argued. Combining the television networks would give them more leverage in negotiations with traditional TV distributors, even as their studios seek to capitalize on rival streaming services' seemingly endless demand for high-quality programs.
CBS is the studio behind Netflix's Dead to Me, which earned actress Christina Applegate an Emmy nomination, while Paramount produces the political action thriller Jack Ryan for Amazon.
Media analyst Michael Nathanson predicted that CBS and Viacom would emphasize the deal's implications for direct-to-consumer offerings, noting that Nickelodeon's family-friendly shows could flow to CBS All Access, a streaming service that just made its first foray into children's content. Paramount's valuable film library (Breakfast at Tiffany's, Chinatown, Top Gun, Mission: Impossible) could find a home at Showtime, which operates both a premium cable TV network and a streaming service.
"Make no mistake this isn’t just about being bigger," said Viacom President and CEO Bob Bakish, who will lead the combined company. "Together, we, CBS and Viacom, are better."
Redstone has been working to position the family's entertainment business for the new media era since her 96-year-old father, Sumner, stepped down from the CBS and Viacom boards in 2016 amid questions about his health and mental capacity.
Former CBS chief executive Leslie Moonves posed an obstacle to merging the media companies, but he was forced to resign last September amid sexual harassment allegations. Joe Ianniello, who worked to stabilize the media company as interim CEO, will become chairman and chief executive of CBS as part of the merger and continue to oversee the CBS-branded assets.
The reunification elevates Bakish to the head of the new company, as president and CEO. He has enjoyed the support of Shari Redstone since he was installed as Viacom's CEO in late 2016.
Bakish has been working to reverse that company’s flagging fortunes since inheriting a film studio that had posted a $445 million annual loss and cable networks with sagging ratings that were at risk of losing distribution.
Paramount, under new leadership, has posted ten consecutive quarters of improving results, although it’s still in sixth place in U.S. theatrical market share. Viacom reached a long-term distribution deal this spring with AT&T’s DirecTV, avoiding a blackout. The media company’s domestic ad sales business grew for the first time in five years.
Viacom also found a way to capitalize on the streaming media revolution with its $340 million acquisition of PlutoTV this year. The free, ad-supported video service has seen 50% user growth this year as it has added new channels and expanded its distribution through partnerships with Comcast and Cox Communications.
CBS, meanwhile, has said its All Access and Showtime streaming services are on track to reach a combined 25 million subscribers by 2022.
The merger, which is subject to regulatory approval, is expected to close by the end of the year. National Amusements, which controls nearly 80% of the voting shares in CBS and Viacom, has already thrown its support behind the merger — seemingly sealing the deal.
The Special Committee of CBS’s board is being advised by Centerview Partners LLC and Lazard Frères & Co. LLC as its financial advisors and by Paul, Weiss, Rifkind, Wharton & Garrison LLP as its legal counsel. LionTree Advisors is serving as adviser to the Special Committee of Viacom’s Board of Directors.