• by Wayne Friedman , June 15, 2005

Viacom, a company that was created in 1971 when CBS was forced by regulators to spin off its library of old TV programs like "The Andy Griffith Show," "I Love Lucy" and "The Twilight Zone," came full circle on Tuesday, announcing plans to spin off CBS as part of a break-up into two separately traded companies, which will once again be known as Viacom Inc. and CBS Corp.

Tom Freston, as expected, will head up the new Viacom, which will be comprised of MTV Networks (including MTV, VH1, Nickelodeon, Nick at Nite, Comedy Central, CMT: Country Music Television, Spike TV, TV Land, and many other networks around the world), BET, Paramount Pictures, Paramount Home Entertainment, and Famous Music.

CBS Corp. will be led by Les Moonves, and will house CBS and UPN broadcasting networks, Viacom Television Stations Group, Infinity Broadcasting, Viacom Outdoor, the CBS, Paramount and King World television production operations, as well as Showtime, Simon & Schuster, and Paramount Parks.

Sumner Redstone will be chairman and controlling shareholder of both companies. The deal is expected to be completed by the first quarter of 2006.

The Wall Street play is the latest in one of the most storied sagas of media industry M&As--which ironically began as a divestiture in 1971 when the Federal Communications Commission imposed the Network Financial Interest and Syndication rules, which forbid television networks from owning and syndicating the programs they aired, due to fears that they were becoming too powerful and were beginning to bottleneck the TV distribution marketplace. Viacom was subsequently spun off as a dividend to CBS shareholders.

Viacom initially expanded into cable TV, acquiring cable TV systems--and ultimately its greatest programming asset, MTV--in a $500 million buy-out from Warner Communications in 1985.

In 1987, Sumner Redstone's National Amusements acquired Viacom for $3 billion.

CBS, meanwhile, went through its own ownership transitions--it was acquired by Westinghouse in 1995, and merged with its Group W Broadcasting and cable operations, before the combined CBS/Group W assets were acquired by Viacom in 2000 for $50 billion.

Dennis McAlpine, managing director of McAlpine Associates, says giving the cable assets the Viacom name "makes sense," noting: "CBS has always been primarily about distribution, while Viacom has been about the programming side."

Viacom executives have said the split will not affect cross-promotional or advertising deals put together by Viacom Plus, the company's multimedia selling division.

McAlpine says the word "synergy"--which media companies used in the past as justification for big mergers--isn't the issue any longer.

"It never was about synergy," he said. "It was about getting bigger and having more toys to play with."