The CBS-Viacom remerger train keeps chugging along as members of both companies’ boards are expected to begin meetings as early as next week.
According to Variety, the companies are in the number-crunching stage for a deal that is expected to be organized with CBS as the acquiring company in an all-stock deal. Current CBS CEO Les Moonves would be the chief executive of the combined company.
But a big sticking point early on in the negotiations is how Viacom should be valued.
According to The Wall Street Journal, Viacom’s valuation was what caused remerger efforts with CBS to go off the rails in 2016. But now there are parts of Viacom that have become more attractive. First is Paramount, with its valuable library and forecasts for a return to profitability in 2019. Second is Viacom’s international business, with its many assets and subscribers around the globe.
Those factors could end up changing the valuation math for Viacom.
MoffettNathanson analyst Michael Nathanson said that a recombination could over complicate things for CBS, or potentially create some fallout if Moonves is not part of the combined company.
“First, any combination, despite the fact that it likely will be accretive for CBS, changes the simple, straightforward narrative and strategy that CBS has lived by. In a world of increasing fragmentation, less is more, which brings us to think of another overhang: losing Les,” Nathanson wrote in a February 2018 research note, adding that losing Moonves would collapse CBS’s valuation.
CBS and Viacom, which are both controlled by majority stakeholder National Amusements, officially reignited a remerger exploration earlier this year.
“There can be no assurance that this process will result in a transaction or on what terms any transaction may occur. Neither Viacom nor the Committee intends to comment further until the process is completed,” CBS said in a statement.
“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. National Amusements does not currently intend to make any further comments regarding the process,” the company said in a statement.