CBS, Viacom Start Committees To Consider Merger

It’s official: The board of directors from CBS and Viacom are exploring the idea of a re-merger.

The companies, which split as publicly traded stocks in early 2006 -- after being together since 1999 -- set up special committees of independent directors to evaluate a potential combination.

This effort has largely been pushed by Shari Redstone, vice chair and board member for both companies. Both are controlled by National Amusements, her family’s company.

Les Moonves, chairman/CEO of CBS Corp., who had been opposed to a re-merger for some time, seems to be amenable now.

This move comes in the midst of an environment where established traditional media are looking to expand in order to compete with financially stronger digital companies. Recent major deals include Disney buying major Fox TV/entertainment assets, AT&T's proposed deal for Time Warner and Discovery’s deal for Scripps Networks Interactive.

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“As the world around CBS and Viacom will soon be inhabited by giant companies with endless balance sheets, the reality of the current arms race has recently weighed on these two stocks,” noted Michael Nathanson, media analyst at MoffettNathanson Research, in a recent report.

Nathanson adds: “This combination should create more aggregate affiliate fee negotiating leverage and substantial cost synergies. In addition, a merger with Viacom would give CBS more cash flow to help prepare for its upcoming NFL negotiations.”

Neil Begley, senior vice president of Moody’s, said: “The potential of a recombination of CBS and Viacom would provide CBS with increased scale, more diverse assets and a major studio, while it would bring many of those same benefits to Viacom. The most important would be to put a surer footing beneath Viacom as it continues to turn around its media networks and Paramount.”

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