CBS, Viacom reunite, hoping to take on Disney and Netflix
CBS and Viacom announced Tuesday that they had agreed to reunite, forming a company they hope will be strong enough to tackle the emerging behemoths of the media landscape.
The combined firm will include a film studio, Paramount Pictures, as well as the CBS network, cable channels such as MTV and Comedy Central and a host of digital platforms.
Executives hope the range of assets will help the firm compete in a market that presents it with some serious headwinds. Netflix, to take one competitor, has become the dominant entertainment subscription service with some 150 million global subscribers, while Disney has the four highest grossing movies in the U.S. this year. (Their total receipts exceed $2 billion.)
"Together we will do more than we could have done on our own," Bob Bakish, Viacom's current president and chief executive who will assume the same role at the combined firm, explained in a call with Wall Street analysts. "Simply put, the combined company will be one of only a few with the breadth and depth to. . .shape the future of our industry."
The company will seek to develop its digital offerings to consumers, which currently consist of niche offerings such as CBS All Access and Showtime services.
The all-stock deal will see each Viacom share converted to .59625 of a CBS share. CBS' market capitalization of $18 billion is about 50 percent larger than Viacom's.
Joe Ianniello, who had been president and acting chief executive at CBS, will now be chairman and chief executive of the company's CBS division. The combined company will be known as ViacomCBS. The deal will close by year's end, the company said.
Shari Redstone, the current vice chair of both companies who has a controlling interest in both firms, will serve as chair of the board of the combined company. In addition to Bakish, the board will be composed of six CBS appointees, four Viacom appointees and two people from Redstone's holding company, National Amusements.
Redstone noted in a statement that she thought the combined unit "can realize the incredible power of their combined assets." She promised "a world-class, multiplatform media organization that is well positioned for growth in a rapidly transforming industry."
The merger concludes a drama that had been brewing for months and amounts to a victory for Redstone, who had been pushing for the reunion.
After several years of circling one another, the two boards began intensifying their talks in recent weeks, according to a person who was familiar with the negotiations but not authorized to speak about them publicly.
Adding urgency to their discussions was the emergence this summer of the streaming strategies from competitors such as WarnerMedia and Comcast. Without Leslie Moonves, the disgraced former CBS executive fired for sexual harassment and opposed to the reunion, those talks could proceed more smoothly.
Still, hammering out a price was not easy, as the two sides disagreed on just what fraction of CBS Viacom shares were worth.
The deal evoked the moment 20 years ago when the companies initially came together after Viacom bought CBS's then parent Westinghouse. At the time, the two lead executives, Sumner Redstone and Mel Karmazin, touted the synergy the combination of Viacom and CBS would bring.
There's less talk about synergies this time, in part because there are so many outside providers to sell content to, and in part because such talk didn't bear a lot of fruit the first time around.