CBS, Viacom bring in bankers as merger talks on terms, management advance

Bankers representing CBS Corp. and Viacom Inc. have begun to hammer out terms and management structure in their latest attempt to merge the two media properties controlled by Sumner Redstone’s National Amusements Inc. And if progress continues, a formal deal could be announced in the coming weeks that would finally merge the two sister companies, FOX Business Network has learned.

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Of course, the talks are fluid and they could hit a snag and breakdown, as they have over the three years that the merger of the outfits has been considered. Possible snafus could arise over who will be named chief executive officer of the combined companies, and how much shareholders of each company will receive in the newly combined entity, according to people with knowledge of the matter.

But at least for now, the merger discussions appear to be proceeding toward a resolution that could be announced possibly in the next month, these people add.

The exact nature of the deal terms could not be determined, though it appears that Viacom chief Robert Bakish has the inside track to become chief executive of the new company given his close relationship with Shari Redstone, the de facto chief of National Amusements. Since 2016, Shari Redstone has been running National Amusements for her ailing father, Sumner, who is at the end of a long career as one of the most prolific dealmakers in the media business.

The fate of CBS chief Joseph Ianniello, is less clear. Ianniello is an experienced financier, who could be invaluable in cobbling together the new outfit that faces significant downsizing and management turmoil. Analysts say Ianiello’s experience also lends itself to the eventual likely sale of the combined company — a move that media observers say Shari Redstone considers as her end game in order to monetize the Redstone family fortune for future generations.

Joseph Ianniello

But people close to the deal talks say Ianniello may stay just through a transition period following the merger, or he could leave immediately. If the deal falls through, Ianniello will likely remain as CBS CEO and seek another buyer, these people say. His contract was recently extended through the end of the year.

Press officials from CBS, Viacom and National Amusements would not comment on the matter, but they would not deny the nature of the ongoing talks.

In April, FOX Business was first to report that CBS and Viacom have renewed merger talks following the ouster of long-time CBS chief Les Moonves over sexual misconduct allegations. Moonves had been against the merger that was supported by Shari Redstone, and sued National Amusements in Delaware Chancery court to both prevent the deal and also dilute the Redstones’ controlling interest in CBS.

The two sides eventually reached an agreement that gave CBS until September 2020 to possibly find another merger partner before it would consider merging with Viacom. However, with Moonves' exit and a lack of interest in CBS from deep-pocketed tech companies that are building their own content, discussions of the merger with Viacom began to gather steam and reach a more formal stage in April, according to people with knowledge of the matter.

As FOX Business was first to report, members of the CBS board met earlier in the month to discuss moving forward with a Viacom deal. And as deal talks have progressed in recent weeks, both sides are said to have retained their long-time bankers to put together a transaction.

Lazard Group will represent CBS, and Morgan Stanley Group Inc., will represent Viacom, according to sources familiar with the matter. Other firms are involved as well. Press representatives for Lazard and Morgan Stanley had no comment.

At least for now, Shari Redstone and National Amusements’ bankers at Evercore Inc., are not directly involved in the negotiations, but that will change as the transaction starts to take shape, these people add.

In 2006, Viacom and CBS were spun out of National Amusements, which retains a controlling interest in both. Over the years, Sumner Redstone gave the companies significant autonomy. But that changed in 2016, when Shari Redstone took de facto control of National Amusements and proposed merging the two companies as a way to deal with media industry challenges such as cord-cutting, which has depressed ratings throughout the industry.

But Moonves feared that Viacom, with its relatively weaker programming lineup of Nickelodeon, Comedy Central and MTV, would be a drag on CBS, a news, sports and television powerhouse.

Bakish, a long-time Viacom executive, was named CEO in November 2016 following the ouster of Philippe Dauman.

NEW YORK, NY - NOVEMBER 27: Bob Bakish, Viacom President & CEO and MTV Staying Alive Foundation Honoree, attends MTV Staying Alive Foundation 20th Anniversary Gala at Guastavino's on November 27, 2018 in New York City. (Photo by Cindy Ord/Getty I

Bakish was initially considered a dark horse to head a joint CBS-Viacom venture, but his star has risen inside the Redstone empire following Moonves’s departure and as Viacom produced strong financial results since he took over.

While no decision has been made about the possible CEO of the new company, if a deal is reached, Ianniello is regarded as being too close to Moonves to get the top job.

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Meanwhile, the combined outfits could have a market value of around $30 billion, making it a sizable competitor in the media space, but still digestible for a buyout by deep-pocketed tech outfits that are looking for content as they expand into the streaming media.