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CBS-Viacom: When a Merger Amounts to a Shotgun Wedding

America’s favorite on-again, off-again relationship might be back on.

No, not Justin Bieber and Selena Gomez; CBS Corp. and Viacom. The companies’s CEOs held an informal talk last week about a potential merger with the expectation that their respective boards will tackle it in greater depth soon enough.

We’ve watched these two companies play footsy with each other for so long that their dynamic has taken on that classic will-they-or-won’t-they? formula from your favorite romantic comedy.

But there’s a plot twist this time around. Tired of flirtations that went nowhere in late 2016, National Amusements president Shari Redstone seems ready to officiate a shotgun wedding. With controlling stakes in both companies, she’s nudging CBS CEO Leslie Moonves and Viacom CEO Bob Bakish to the altar whether they like it or not.

It’s not difficult to see why Redstone has changed her tune from letting these lovebirds go their separate ways to a forced reunion. Look at pending mergers between AT&T and Time Warner, Disney and Fox, and Discovery and Scripps. Everyone in the sector is mating like rabbits to achieve the kind of scale that gives them a fighting chance against the tech world’s colossi.

But while the peer pressure to couple up is enormous, does that mean CBS and Viacom would be getting together for the right reasons? Maybe not.

Who could blame Moonves for having cold feet considering the distressed state of Viacom. While Bakish deserves credit for wiping away plenty of the dust and rust that have collected on the once-great brands in his portfolio like MTV and Nickelodeon, the sad fact is that the neglect they suffered under for too long during the Philippe Dauman era will take many more years to reverse. Had one true hit emerged from his networks or movie studio this past year, he might have bought himself more time to go it alone, but Bakish didn’t end up that lucky.

And even had he miraculously managed to pull off a quicker turnaround, that would really be besides the point. The linear-network business model that made Viacom so successful for so long seems headed for extinction. Taking on Bakish’s portfolio would dilute the double-digit growth of his beloved retransmission fees.

If Moonves is having problems with commitment, that may have something to do with the fact he’s still playing the field: Verizon, Lionsgate and Sony are just a few of the names CBS is rumored to have talked with about M&A possibilities. But Redstone is highly unlikely to OK a deal that doesn’t have Viacom attached.

But given the shortage of logic dictating a CBS-Viacom deal, it’s tempting to wonder whether such a merger shouldn’t be looked at in a vacuum but as the prelude to yet another deal that combined with another property like a Verizon doesn’t seem so ill-conceived anymore. In this consolidation-crazy era, some Voltron-esque combination of multiple conglomerates doesn’t sound as far-fetched as it once might have.

A good merger should make 1+1=3. CBS and Viacom alone feels more like 1.3.

In the direct-to-consumer world Big Media is headed, CBS has moved shrewdly and aggressively with a multi-pronged brand strategy led by CBS All Access. But what would Moonves do to energize Viacom for that same world given its heavy unscripted library isn’t built for SVOD licensing, where scripted rules, or skinny bundles, where the absence of news and sports is a huge disadvantage.

Moonves would have to reinvent how Viacom’s brands make money to truly rejuvenate them, and that’s one tough pivot to pull off.

Of course, Moonves may be willing to take on that challenge if he’s handed the reins of the combined company under deal terms that won’t make his shareholders revolt. Moonves has a ton of leverage here. He has enough credibility with Wall Street that his departure from the company could punish these stocks at a time when their combination is intended to lift them. But that doesn’t mean Redstone isn’t willing to risk going on without him, perhaps calculating that Bakish has done well enough over the past year to keep investors from freaking out if Moonves leaves.

The power struggle between him and Redstone is a delicate dance, as evidenced by last month’s Wall Street Journal report suggesting she was ready to restock CBS’s board of directors.

Playing hardball in the press may come with the M&A territory but it sends exactly the wrong message to the market considering the tortured history of boardroom shenanigans these companies share. Just when Bakish has done so much good work to stabilize Viacom, the proceedings are threatening to devolve into the kind of dysfunctional mess that marked the Dauman era.

If all parties aren’t careful, the circus atmosphere that overtook Viacom for too long will return in force and destabilize a deal they may have no choice to make despite the inherent difficulties. But this can’t be rushed because there’s a lot at risk.

After all, you can’t hurry love.

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