As investors gird for listless Viacom earnings, CBS reportedly hires advisors on possible merger

Viacom is scheduled to report its third-quarter earnings tomorrow, and investors generally expect the media giant to report declines in almost every financial metric. Nonetheless, CBS reportedly is getting more serious about a possible merger with Viacom, and has reportedly hired financial advisors to dig into what a merger might look like.

According to the Wall Street Journal citing an unnamed source, CBS has hired Moelis & Co. and Goldman Sachs to research a possible merger with Viacom. The news comes as little surprise; rumors have been bubbling for weeks that the companies might try to re-unite after their corporate separation in 2006. Indeed, the WSJ noted that Sumner Redstone’s National Amusements, which controls both companies, has asked Viacom and CBS to explore a potential re-unification.

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But that merger would come at a difficult time for Viacom. As MarketWatch points out, Viacom is expected to report earnings down 37 percent from the company’s most recent quarter -- and down fully 57 percent from the same period a year ago.

But the troubles don’t end there. Viacom just last month named its third CEO in just over two months. Bob Bakish will take over as president and CEO Nov. 15 following the departures of former CEOs Philippe Bauman in August and Tom Dooley in September.

"We are determined to move forward aggressively to strengthen Viacom for the future, whether as a stand-alone company or in a potential combination with CBS. There is a great deal of opportunity ahead and Bob is a superb leader to drive this effort, fully empowered to take the actions necessary to position Viacom for success," said Tom May, chairman of the board, in a statement announcing Bakish’s promotion.

For his part, CBS chief Les Moonves said the company continues to eye a tie-up with Viacom, despite the company’s ongoing challenges. “So the state of the CBS Corporation is extremely strong, which is more important now than ever given changes in our industry and as we consider a potential recombination with Viacom,” he said last week during CBS’ quarterly conference call with investors, according to a Seeking Alpha transcript of the event. “As you know, our board has formed a special committee to work with us and explore this possibility, and we are still in the very early stages. So while the timetable and outcome are unclear, our strategy is not. If it looks right and is structured properly, it could be an attractive opportunity. If not, we are very excited about our prospects on our own and as you can see in our excellent results.”