National Amusements Pushes CBS-Viacom Merger Plan

Christopher Patey
Sumner Redstone

Viacom stock spiked on the news, trading up 2.7 percent.

National Amusements is pushing CBS and Viacom closer to a merger. 

However, no letter has been sent from Sumner Redstone's holding company to CBS or Viacom, sources tell The Hollywood Reporter, which makes it an odd move that the push would leak to the media in advance of an official approach to both companies.

National Amusements will ask the boards of both companies to form independent committees related to a possible merger as early as next week, Reuters first reported. The Wall Street Journal then said the letter would likely be sent early on Thursday.

"As we've said before, the CBS Corporation will always act in the best interest of all of its shareholders," a company rep said in a statement. 

National Amusements controls 80 percent of the voting shares of both Viacom and CBS, and is privately owned by Sumner Redstone and his daughter Shari. Former Viacom CEO Philippe Dauman was forced out of his role at the company this summer after losing a legal bid to declare the 93-year-old Sumner Redstone mentally incompetent. He took a severance package of $70 million.

Mario Gabelli, the billionaire investor who owns more of Viacom's voting shares than anyone not named Redstone, tells THR he's also in favor of a CBS-Viacom merger, in part because it would create a much larger company with more leverage when it comes to striking TV distribution deals.

"Is it logical? Yes, if CBS is thinking, how do I go global quickly? This is one way," says Gabelli.

He also says Shari Redstone is looking out for her father's legacy, which would be enhanced if Viacom and CBS were to reunite with CBS CEO Leslie Moonves — trusted by both Shari and Sumner Redstone — at the helm.

"Romancing Les has got to be a high priority right now," says Gabelli, who figures a CBS-Viacom merger could close in about six months.

When interim CEO Tom Dooley said last week he'd be leaving Nov. 15, it was a signal that a merger with CBS was on the table, many observers say.

"Dooley is too close to Philippe. If the goal is to make a fresh start, then his departure makes that easier," says Brett Harris, a research analyst with Gabelli & Co.

Gabelli and Harris speculate that Viacom, meanwhile, is focusing on an internal search to replace Dooley as CEO, and will likely settle on one of three executives: Doug Herzog, president of Viacom Music and Entertainment Group; CFO Wade Davis; or Robert Bakish, president and CEO of Viacom International Media Networks.

Wells Fargo analyst Marci Ryvicker in a first reaction wrote in a note to investors: "We view this as a pretty reasonable thing for National Amusements to do as a CBS-Viacom merger is a possible option — not one that we like at the moment, but the fact that it is being explored is reasonable and not surprising to us."

Highlighting that NA is looking to request the recombination option, she added that this "means (to us at least) that there is no 'forcing' a combination, and that CBS/Les Moonves clearly gets a say here."

Concluded Ryvicker: "Given that CBS has been invited to the decision-making party, we are even more comfortable that whatever decision is reached will be in the best interest of CBS shareholders — whether that is: levering Viacom to purchase CBS at a premium, CBS purchasing Viacom at a discount, or CBS concluding that nothing can be done, therefore it will remain independent."

Moonves "has talked about a $100 per share sales price [for CBS] before, which would be some pretty nice upside," the analyst also noted.

Viacom stock spiked on the news, trading up 2.7 percent to $35.95 from $35.01. The company now has a market cap of $14.56 billion.

Viacom and National Amusements declined to comment on the deal.

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