The possible recombination of Viacom Inc. and CBS Corp. is continuing to play out amidst a series of reported counteroffers and concerns about the executive leadership structure.
Should the parties come to an agreement — more than 12 years following the split of the combined entity on Dec. 31, 2005 and after National Amusements Inc., the holding company that controls nearly 80% of the voting stock in both, abandoned a similar effort late in 2016 — the reunited entity would emerge as a larger financial force in the evolving media landscape.
Gauged on if their results from 2017 were combined, CBS and Viacom would have posted higher revenue, EBITDA and net income levels than its predecessor last decade.
Together, CBS and Viacom would have generated nearly $27 billion in revenues last year. The former tallied $13.69 billion, almost $700 million more than Viacom’s $13.01 billion. During the first nine months of 2005 — Viacom only reported results for nine months before the split at year-end — the combined entity reported total revenue of $17.32 billion and $22.53 billion over the full year in 2004. Viacom was officially separated from CBS on Dec. 31, 2015.
In terms of net income, Viacom scored $2.02 billion last year, versus $360 million for CBS, whose results were impacted by a net loss of $105 million from the split-off of CBS Radio and market value adjustment of $980 million recorded prior to the split-off to reduce the carrying value of the property. During 2017, CBS had EBITDA of $3.05 billion, with Viacom’s $2.93 billion. The total, approaching $6.00 billion, compared favorably with the $4.55 billion for the unified company in 2005 and was $90 million more than the old Viacom’s $5.89 billion total the prior year.
During the 2005 period, the then-combined Viacom recorded net income of $2.05 billion.
Conversely, the totals for the separate companies came up short on a cash flow basis in 2017, when CBS registered $890 million and Viacom produced $1.52 billion. Looking back to the first nine months of 2005, the combined Viacom entity posted $2.96 billion in cash flow and $3.64 billion over the course of 2004.
Despite being favored by holding company National Amusements and its president Shari Redstone, their recombination has yet to materialize.
Viacom, according to recent reports, is seeking a bid from CBS that would value the company at about $14.7 billion, about $3 billion higher than the valuation proposed by CBS. Viacom is also pushing for its current President and CEO Bob Bakish to be named second in command and be in position to succeed CBS CEO and Chairman Les Moonves when he retires. CBS prefers that longtime COO Joe Ianniello serve as No. 2 at the expanded company.
Reports have indicated that Shari Redstone would look to replace Moonves and the CBS board of directors if the broadcaster could not come to a merger agreement with Viacom. Subsequently, National Amusements and CBS submitted statements supporting Moonves.
Shari Redstone and her father, Sumner, chairman of National Amusements and founder and chairman emeritus of Viacom, had pushed for a reunion late in 2016, before determining it was not "the right time to merge the companies."
Since then, the media landscape has changed considerably. Discovery Inc. completed its acquisition of Scripps Networks in March, a move that gives the combined company 20% of the U.S. TV audience. Walt Disney Co. is awaiting various regulatory approvals to purchase myriad international and domestic assets from 21st Century Fox Inc. The U.S. Department of Justice is seeking to block AT&T Inc.'s takeover of Time Warner Inc. Meanwhile, subscription video on demand proponents Netflix and Amazon continue to invest heavily in programming as they bolster their subscriber rolls.
Under Bakish, who has been heading Viacom’s day-to-day operations since December 2016, the company has embarked on a turnaround strategy that focuses resources on six flagship networks, inked new carriage deals and installed Jim Gianopulos to revitalize Paramount Pictures. Viacom is also gearing up for the launch of a direct-to-consumer streaming product by the end of its current fiscal year.
For its part, CBS is well down the direct-to-consumer path with streaming subscription services CBS All Access and Showtime OTT, ad-supported news service CBSN and the recently launched CBS Sports HQ news and highlight offering.
Last year, broadcaster CBS (US) again hit the $4 billion advertising sales mark and is well on its way to eclipsing its goal of ringing up $2.5 billion in retransmission-consent fees and reverse compensation revenue by 2020.