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Who could have imagined it would come to this?
For many years, it was unthinkable that CBS Corp. chairman and CEO Leslie Moonves — seasoned, successful, admired by many on Wall Street — could be forced out of a role that he seemed born to play: running a merged CBS and Viacom. Now it seems much more than thinkable.
Moonves, 68, is on the precipice, locked in battle with Shari Redstone, the 63-year-old vice chairwoman of CBS and Viacom. Shari, daughter of ailing 94-year-old empire builder Sumner Redstone, insists that Viacom and CBS must merge, an idea that once would have held great appeal for Moonves — assuming he would be in charge. But in a transforming media environment that has buffeted Viacom assets like MTV and Nickelodeon, the plan is repellent to Moonves. And not only is Redstone pressing for a merger, she also is widely seen as intent on taking a hand in the running of the combined companies. For Moonves, long accustomed to being absolute monarch at CBS, that looks like a deal-breaker.
In 2016, when Shari fought a tough battle to oust Viacom’s then-chief executive Philippe Dauman, she insisted she had no interest in managing Viacom and that she just wanted to grow her Boston-based investment company, Advancit Capital. Presumably she would say now that she still has no interest in managing a combined CBS and Viacom. But while she may not want an executive role, the perception is that having finally stepped in as her reluctant father’s successor and having finally ejected her onetime rival, Dauman, she has developed a taste for control.
Moonves already fended off pressure to merge CBS with Viacom in the immediate aftermath of Dauman’s ouster in 2016. This time around, Redstone feels much more urgency to get a deal done as the competition bulks up: Disney is buying most of Fox, and AT&T is fighting in court to acquire Time Warner. At this point, even a combined CBS and Viacom still will have more dealmaking to do if it is to survive. But given Viacom’s problems, CBS remains a reluctant suitor, originally making a lowball offer for Viacom that came to roughly $11.9 billion. Viacom countered with an increase of about $2.8 billion.
The dispute over price pales in comparison to the control issue. Hypothetically, both sides agree that Moonves should be CEO of a combined company — at least for now. But Redstone wants to install Viacom CEO Bob Bakish, 53, as the No. 2 and eventual successor, while Moonves is adamant about keeping his COO, Joseph Ianniello, in that role.
“If you’re Les at this point in his career, you’re not looking to have a new boss, to get a new partner,” says an executive with ties to both sides of this argument. “It’s not that shocking for someone who’s been as successful as he has to say, ‘I’m not willing to accept a radical change in the environment.'”
At this point, Redstone is letting it be known that she feels CBS has been so negative about Viacom that Moonves may not be an effective leader of a combined company. Certainly the conflict has become poisonous. Some in the CBS camp suspect Redstone of undermining their leader with a campaign of leaks about her dissatisfaction with the supposedly entrenched CBS board and an alleged lack of strategic planning. They think the forces of Shari are in league with Wall Street analyst Rich Greenfield, who they believe is helping to sell the idea that Bakish is as strong a candidate as Moonves to run a merged company. (Greenfield does support Bakish but dismisses the idea that he’s being used as a Redstone pawn.)
CBS insiders also think Team Shari is spinning a fairy tale that Bakish has presided over some kind of turnaround at Viacom that would make it a good buy for CBS. Where, they ask, is the evidence of that turnaround? They argue that Viacom is relying on wildly optimistic projections of future performance to bolster the merger and Bakish on Wall Street. Sources say the Viacom deck is so sanguine that it projects 20 films in a row from the struggling Paramount studio will perform up to expectation or better.
The CBS camp appears to be striking back. On April 9, someone leaked a letter to Bloomberg in which a person described as a top 10 CBS shareholder argued that Moonves should lead the combined company with the management team of his choice. If that doesn’t happen, the letter said, CBS should be compensated with a “clear premium” in any deal. “Coming to the rescue of a weakly positioned, poorly executing, over-leveraged Viacom is not CBS’ burden,” the investor wrote.
And Moonves has several analysts stressing their support for him. “Continuity in the CEO role is a key component to company success and investor confidence,” RBC Capital Markets analyst Steven Cahall wrote in an April 5 investor note. “The risk is that investors could bail on the stock if Moonves leaves.”
More recently, on April 10, analyst Todd Juenger took aim at the merger itself. In a report captioned, “An arranged marriage: one spouse reluctant, the other desperate,” he warned, “CBS cannot fix Viacom’s core problems.” Giving ammunition to those at CBS who disparage the Viacom turnaround story, Juenger expressed suspicion about the upcoming April 25 Viacom second-quarter earnings report: “Beware of manufactured earnings and even manufactured revenue.”
A source who is observing the action from the inside notes that Redstone is equally obligated to protect the interests of CBS and Viacom shareholders. In seeking to impose her will, this person says, Redstone “has this power, but as soon as she uses it, she has this potential liability.”
Redstone may very well get her way; as Dauman discovered, an owner always has the edge in a battle with an executive. Of course, Dauman was paid handsomely to go away, and Moonves, with two years left on his contract, presumably would be as well. Not that he needs the money.
One associate recalls how Moonves reacted when the idea of re-combining the companies was broached in 2016. At an industry conference that year, Moonves was asked why he might not support a merger. “Because I’m too old and too rich,” he answered. “How’s that?” He hastily added that he was joking. Since then, of course, Moonves has gotten a little older and even richer. And he may not be in a joking mood anymore.
Paul Bond, Georg Szalai and Etan Vlessing contributed to this report.
This story first appeared in the April 11 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.
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