CBS, VIACOM DEAL DONE. “..the companies are hoping to announce an agreement by Tuesday..” By Todd Horwitz, Bubba Trading.

 

CBS, Viacom in Final Stages of Talks

CBS Corp. and Viacom Inc. are in the final stages of negotiating a deal that would reunite mogul Sumner Redstone’s media empire in the hopes of creating a more formidable competitor to the entertainment industry’s giants.

The two sides are still working out details, including the stock exchange ratio for the transaction but have narrowed it down to a range of between 0.59 and 0.60 CBS share for each Viacom share, according to people familiar with the matter. That ratio would value Viacom slightly below its market value as of Friday, which was about $12 billion. As a result, CBS shareholders would own more of the combined company than CBS’s share price would imply. The exchange ratio is crucial because it determines the price of a merger in an all-stock deal, such as the one under discussion between CBS and Viacom.

Viacom shares were down about 3.3% Monday morning, trading within the exchange ratio range. CBS shares were down less than 1%.

A merger will add movie studio Paramount Pictures, cable networks such as Comedy Central, MTV, Nickelodeon and BET and assets including the streaming service Pluto TV and South Park Studios to CBS, which owns the eponymous broadcast network and other cable and media assets.

Shari Redstone, whose National Amusements is the principal owner of both companies, has advocated for a deal to give a combined company more financial heft to compete against media and tech heavyweights including Amazon and Apple for entertainment and sports rights, most notably the National Football League. CBS owns NFL broadcast rights until 2022 and “will do what is necessary” to renew them, according to CBS Sports chief Sean McManus.

CBS and Viacom nearly merged a year ago before a rift over who would run the combined company derailed discussions. Viacom also scrapped plans to merge with CBS in 2016. The companies restarted merger talks in earnest this year after CBS replaced six members of its board of directors and its CEO, Les Moonves, in September. Moonves stepped down as chairman and CEO amid sexual misconduct allegations. Discussions have dragged on throughout the year as the new CBS board has become more comfortable with the idea of merging with Viacom rather than pursuing other paths.

The deal, if completed, would bring under one roof such recognizable American media properties as Viacom cable channels like MTV and Nickelodeon, the Paramount film and TV studio and the CBS broadcast network. There is still a chance that the price could fall outside that range or that the talks could break down, but the companies are hoping to announce an agreement by Tuesday, the people said.

Todd “Bubba” Horwitz

IN ASSOCIATION WITH

Financial Markets and Political Commentary
 

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About the author

Todd Horwitz - Author of “Average Joe Options“. Todd began his trading career in 1980 at the CBOE. He was one of the original traders in the OEX & helped start the SPX. He is a member the CME where he trades S&P futures as well as foreign currencies & is a regular contributor to CNBC, Bloomberg, BNN, Fox & many other major news networks.