Big bucks break-up fees, contract clauses raise eyebrows on ViacomCBS deal
The brass of the new ViacomCBS will collect a big payday if the merger is approved. But there is even more money at stake if the deal falls apart.
Bob Bakish, the current CEO of Viacom, would hold the same role for the combined company. His compensation would skyrocket from $20 million to more than $31 according to a filing made Monday with the Securities and Exchange Commission. However after the media marriage was finally consummated last week after months of talks, Wall Street applauded tepidly and both stocks saw some downgrades.
Anyone concerned about that reaction won’t be made to feel at ease by the big bucks breakup fees that could be paid out should the merger fail. According to the SEC filings, if Viacom were to terminate the deal before May 13, 2020, it would be forced to pay CBS $373 million. If CBS were to get another offer or pull out of the deal for any other reason by that same date it would have to pay Viacom a whopping $560 million.
Breakup fees are always part of the norm in such deals, but they take on a larger meeting with the inclusion of an "Extraordinary Transactions" clause in a governance agreement signed between Viacom, CBS and its parent company National Amusements. The clause says that the "NAI Entities acknowledge and affirm they are open to exploring expressions of interest by third parties in potential business combinations or other strategic alternatives," and adds that until the second anniversary of the closing, "the NAI Entities hereby agree to give good faith consideration to any business combination transaction or other strategic alternative involving the Surviving Corporation that the Unaffiliated Directors determine may be in the best interests of the Surviving Corporation and its stockholders."
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Already there were reports just hours after the agreement was announced last week that Amazon – seeking to bulk up its video offerings as the streaming wars heat up would be game to purchasing the new ViacomCBS. But these rumors have been kicking around for more than a year to no avail.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| CBS | n.a. | n.a. | n.a. | n.a. |
| VIAB | n.a. | n.a. | n.a. | n.a. |
| AMZN | AMAZON.COM INC. | 179.51 | +2.29 | +1.29% |
| NFLX | NETFLIX INC. | 577.51 | +22.91 | +4.13% |
Once the deal – which still needs federal approval – is completed possibly by year’s end, ViacomCBS will have a library of more than 140,000 TV episodes and 3,600 film titles, including franchises such as "Star Trek" and "Mission: Impossible."
The two companies have been major content spenders, having spent more than $13 billion combined in the past year -- close to the estimated $15 billion Netflix is expected to spend on content in 2019. Plus, the two companies have more than 750 series currently ordered or in production.
