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CBS and Viacom Move Closer to Merger Talks

The CBS Corp. board of directors is moving closer to initiating acquisition discussions with Viacom, according to multiple sources close to the situation.

The move has been expected for months, although there may still be obstacles on the road to a reunion for the two sides of the Redstone media empire. Price could still be a sticking point. People close to the matter said CBS views Viacom as having a host of troubled assets including low-profile cable channels that are endangered species in a skinny bundle world. But Viacom believes it is in a much stronger position than it was this time last year, when the sides last made a fitful attempt at merger talks.

The strongest signal of the movement toward a recombination of the companies that were joined from 2000 through 2006 was CBS’ decision on Tuesday to call off its search for a permanent CEO. Joseph Ianniello, who has served as president and acting CEO since September, extended his contract, which had been set to expire in June, through the end of this year.

CBS’ long-term fate has been uncertain since last September, when longtime chairman-CEO Leslie Moonves was fired as sexual assault allegations from the past surfaced through investigative reporting by the New Yorker. But in the months leading up to Moonves’ ouster, CBS had been embroiled in a bitter legal battle with controlling shareholder Shari Redstone for control of the company. CBS claimed that Redstone was improperly trying to force a merger of CBS and Viacom as a means of rescuing Viacom at the expense of CBS shareholders. That litigation was settled last September as part of Moonves’ exit negotiations.

A big hurdle the last time around was a dispute over the management configuration for the combined company. With Moonves out of the picture, those concerns are seen as less of an issue now. It is believed that Viacom president-CEO Bob Bakish is in the “pole position” to lead the combined entity.

Ianniello had been a candidate for the permanent CEO post at CBS. It’s unclear if he would be offered — or if he would be interested in — a post below the CEO rank at the company, such as COO, if a merger comes to fruition. But Ianniello would be a key player if a merger happens in order to allow for a speedy integration because of the depth of his knowledge of CBS’ assets. Before becoming COO to Moonves in 2013, he was chief financial officer and the architect of numerous transformative deals for CBS, including the spinoffs of its outdoor advertising unit and radio station holdings.

The renewed discussions on a CBS-Viacom merger come after the CBS board has spent the past eight months considering a wide range of options for the company. Redstone has made it clear that she feels CBS and Viacom are best served by formally reintegrating. Redstone’s National Amusements holding company is prevented from proposing a CBS-Viacom merger for another 18 months, per the terms of the 2018 settlement of the litigation. But that doesn’t stop the CBS or Viacom board from initiating such discussions.

In the last go round in early 2018, CBS floated a low-ball offer that valued Viacom at just under $12 billion, at a time when Viacom’s market cap was about $14 billion. Viacom’s board last year quickly rejected that offer. As of Thursday, Viacom’s market cap stood at $12.2 billion after a choppy year for Viacom shares in particular and media stocks in general. Viacom shares are up 13% for the year to date, in part because of renewed merger speculation. CBS shares are up 16.7% for the year to date, reflecting investor uncertainty about its long-range horizon and the pessimism among some about the benefits of renewing its vows with Viacom.

Reps for CBS, Viacom and National Amusements declined to comment.

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