Blog Coverage CBS and Viacom Requested to Consider Merger by Majority Voting Stockholder National Amusements

LONDON, UK / ACCESSWIRE / September 30, 2016 / Active Wall St. blog coverage looks at the headline from CBS Corporation (NYSE: CBS) and Viacom Inc. (NASDAQ: VIAB). National Amusements Inc. announced on September 29, 2016, that it had written to the board of CBS Corp. and Viacom for them to consider a merger between them in a bid to effectively face the changing scenario of the entertainment and media industry. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

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National Amusements, Inc., is a world leader movie theatre business operating more than 950 movie screens in the US, UK, and Latin America. It is closely held and operated by the Redstone family.

Highlights of the merger proposition

National Amusements holds a majority voting stock of nearly 80% in CBS and Viacom. In the written communication, which was made public by Sumner Redstone, the CEO of National Amusements, he had asked the board of both companies to consider an all-stock merger of the two companies. He is of the belief that the merged entity would offer substantial synergies and will be better equipped to take on the challenges of the changing entertainment and media sector.

According to him the ideal proposition would be an all-stock deal wherein shareholders of the respective company would get shares in the merged entity in the same number and class of shares that they currently own. In the interest of a fair result, the boards of both companies will need to give their approvals and will have the final say in the matter. Also directors Shari Redstone, Sumner Redstone, and David Andelman would not participate in the deliberations.

He has even specified that National Amusements will not entertain any third party acquisition of either companies nor will it surrender its majority and control in both companies or in the merged entity.

Backdrop for the proposition

CBS and Viacom had split into separate companies in January 2006. CBS ended up with the TV station network and CBS Radio. Viacom got the cable networks VH1 and Nickelodeon as well the Paramount movie studio. At the time of the split, Sumner Redstone had said that the split was necessary to respond to changing industry landscape. Post separation the performance of both companies was completely opposite. CBS became highly successful whereas Viacom was struggling to keep up its business. CBS’ shares have been up 43% in last 12 months as compared to Viacom shares which are down 49% in last two years.

Viacom is facing rough waters in recent times and is dealing with serious leadership problems. Its current CEO, Thomas Dooley, has put in his papers and will exit in November 2016. Paramount Studio’s Vice Chairman, Rob Moore, who was considered number two in the leadership ring had been fired as the studio had amassed loses worth $450 million in FY16. The poor performance of Viacom could also have led the parent company to consider the merger.

Another reason speculated by media experts and analysts points to the power play by Shari Redstone, daughter of Sumner Redstone, who has risen in power within the company and is now looking at taking charge of the $40 billion media empire. She was instrumental in the ouster of Viacom Chief Executive Philippe Dauman from the boards of both CBS and Viacom. Shari is in favour of CBS CEO Leslie Moonves to head the merged entity, but he is not too keen since according to him Viacom is not a value proposition given CBS’s premium position. If CBS does merge with Viacom it will end up handling Viacom’s current mess. However, if Moonves takes over Viacom’s leadership, he could work his CBS magic on the failing company. But given Viacom’s current valuation and the various businesses involved, the CBS Viacom merger is complex financial challenge. The investors of both companies need to wait and watch as to how the matter plays out.

Stock Performance

CBS Corp.’s stock is trading slightly up by 0.78%, closing Thursday’s session at $54.57 on volume of 12.34 million shares, which was higher than the 3 months average volume of 3.98 million shares. The company’s shares gained 16.86% since the beginning of the year. Additionally, the stock has surged 38.45% in the last twelve months. The company’s shares are trading a PE ratio of 16.23 and have a dividend yield of 1.32%.

At the close of trading session on September 29, 2016, Viacom’s stock price rose 3.31% to end the day at $37.77. A total volume of 11.4 million shares were exchanged during the session, which was above the 3-month average volume of 3.55 million shares. The stock is trading at a PE ratio of 7.28 and has a dividend yield of 2.12%.

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