A potential reconciliation between CBS and Viacom has produced a tumultuous “Will They or Won’t They” narrative over the past few years. But at this point, industry analyst Michael Nathanson believes the merger is a “foregone conclusion.”
MoffettNathanson said in a research report that CBS’ stock is being negatively impacted by both the loss of CEO Les Moonves and Viacom deal overhang. But by recombining CBS and Viacom, both companies could address several potential problems.
The firm said Viacom could benefit by having its cable networks attached to CBS’ networks during carriage negotiations with operators, and Viacom could use CBS’s TV library content on its cable networks. A remerger could also mean that Showtime gets pay 1 window access to Paramount Pictures’ films. Perhaps most meaningful would be the cost synergies.
“The combination would generate massive cost cuts which CBS could artfully deploy into more original content spend and higher NFL rights fees,” wrote Nathanson. “In a world where scaled players like Netflix, Disney and Comcast (and even AT&T, for that matter) roam, CBS (as currently constructed) looks too small to keep up with the escalation in content investment going forward.”
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CBS and Viacom remerger talks in 2018 dissolved into a bitter feud as CBS sought to dilute majority shareholder National Amusements’ voting power within the company. CBS accused NAI’s Shari Redstone of interfering with the CBS board nomination process, of acting to undermine CBS’ “highly lauded and successful management team in a series of escalating attacks,” and blocking another unnamed acquisition partner from pursuing a deal with CBS.
The legal dispute was settled in September 2018, and Moonves left the company after several accusations of sexual misconduct were leveled against the longtime CBS executive.
Now the companies could be willing to restart negotiations regarding a possible merger. According to Bloomberg, when CBS board members convene later this month for an annual meeting, a possible merger with Viacom will be up for discussion.
Nathanson said his firm believes Viacom will propose a merger shortly after renewing its affiliate deal with DirecTV later this year.