Sumner Redstone urges Viacom-CBS deal, rules out others
Sumner Redstone's National Amusements, the majority shareholder of CBS Corp and Viacom Inc , on Thursday proposed a merger of the two and said it would not support the acquisition of either media company by a third party or surrender its control of either firm.
Privately held National Amusements, which owns 80 percent of voting shares of both companies, said in a letter to both companies' boards that a merger would "offer substantial synergies that would allow the combined company to respond even more aggressively and effectively to the challenges of the changing entertainment and media landscape."
CBS shares closed 0.8 percent higher at $54.57 on Thursday and Viacom shares rose 3.3 percent to end at $37.77
When Redstone split CBS from Viacom 10 years ago, investors saw the broadcaster as a slow-moving company catering to an older audience, compared with the young, scrappy Viacom, whose networks include Nickelodeon and MTV. But CBS shares have outperformed those of Viacom over the last five years.
Shari Redstone, Sumner Redstone's daughter and an owner of National Amusements, has favored recombining the two under the leadership of CBS Chief Executive Officer Leslie Moonves, sources have previously told Reuters.
But for a deal to happen, the Redstones will have to assure Moonves he will have full autonomy over the combined company, according to a person familiar with the situation, who wished to remain anonymous because he is not permitted to speak to the media.
Reuters was first to report on Wednesday that National Amusements could contact CBS and Viacom as soon as this week to ask them to form independent board committees to discuss a potential merger.
Industry speculation that the two might tie up has increased in recent weeks after the Redstones prevailed over a power struggle that resulted in the departure of Viacom Chief Executive Officer Philippe Dauman.
Both companies acknowledged receipt of the letter.
CBS's management and independent directors "will take appropriate actions to evaluate what is in the best interest of the company and its shareholders," a representative said.
Viacom said it expected its board to form a special committee of independent directors to consider National Amusements' request.
In its letter, National Amusements said the optimal deal would be an all-stock transaction giving holders of each company shares in the combined entity of the same class they currently own.
Any transaction would require the approval of both boards. Sumner and Shari Redstone will not vote on the deal as directors of Viacom and CBS or participate in deliberations, according to the letter. David Andelman, a CBS director, also will not participate in the process.
It is within National Amusements' rights to refuse considering any other acquisition of either company, two lawyers familiar with the matter said on Thursday.
The NAI letter does not require the board of either company to run a wider sales process because it would be ���an act of futility,��� said one of the lawyers, who is an expert on Delaware law and did not want to be named.
(Reporting by Anya George Tharakan in Bengaluru and Anna Driver, Jessica Toonkel and Michael Flaherty in New York; Editing by Lisa Von Ahn and Matthew Lewis)