CBS-Viacom merger in the offing as companies form special committees

02 Feb 2018

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A CBS-Viacom reunion seems to be on the cards as the companies announced the formation of special committees to evaluate a potential merger, by their respective board of directors.

However, the companies cautioned investors that no assurance can be given that a transaction between the two will occur, and the independent boards and shareholders of  both companies'  would have to approve the deal.

But Shari Redstone, whose National Amusements owns a controlling stake in both media companies and 80 per cent of their Class A shares, applauded the start of the merger talks. ''National Amusements supports the processes announced by CBS and Viacom to evaluate a combination of the two companies, which we believe has the potential to drive significant, long-term shareholder value,'' the company said in a statement. ''National Amusements does not currently intend to make any further comments regarding the process.''

According to commentators, though the companies' merger talks were called off in 2016, the media landscape has evolved dramatically since then, with the proposed mega-mergers of AT&T and Time Warner and Disney and Fox. As per industry observers, the size and heft are essential for media companies to hold their own as tech giants increasingly make inroads into the entertainment sector.

According to commentators, the statements mark the latest sign that the reunion of the two companies is in the offing. But there are many hurdles to clear in terms of valuation of a deal, given the systemic concerns around the diminishing value of Viacom's lower-profile US cable networks. However, there is also an understanding that the media landscape is changing fast and the potential for the two sides to work together on international growth initiatives offers rationale for a reunion.

Meanwhile, the share price of Viacom tumbled further over the past year, which makes a deal more attractive  on a financial basis for CBS shareholders.

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