Well, add Verizon to the many plot twists in the on-again-off-again merger drama involving CBS, Viacom and the Redstone family which controls both companies through the movie theater chain National Amusements.
According to Reuters and other news outlets, the largest U.S. wireless carrier has expressed an interest in buying CBS though it isn’t clear how far the buyout discussions progressed. Deadline says the “high-level” talks occurred about a year ago, adding that Shari Redstone indicated that she could see “greater value” in a deal for both CBS and Viacom , which cooled Verizon’s “urge to merge.” I would suspect that the government’s lawsuit to block the AT&T-Time Warner deal may have played a role in Verizon’s decision to “slow its roll” as well.
Ordinarily, Verizon’s overture to CBS would be huge news, but it got overlooked in the escalating war of words between CBS and National Amusements which culminated the media company’s “nuclear option” lawsuit filed yesterday seeking to break free from the control of the Redstones. According to a court filing, Shari Redstone “told the CEO of a potential acquirer that he should not make such an offer.” To be clear, the filing doesn’t identify the potential buyer. The Reuters and Deadline stories, however, make sense.
For one thing, Verizon is under pressure from Wall Street to grow its Oath content business (formerly known as Yahoo) whose properties include The Huffington Post, AOL and Yahoo Finance. Moreover, Rosenblatt Securities analyst Alan Gould argues Verizon is a better fit for CBS than Viacom because CBS has a small footprint in the cable (Showtime, CBS Sports Network, Smithsonian) and feature film businesses compared with Viacom’s Paramount studios and MTV Networks cable division (MTV, BET, and Comedy Central.)
New York-based CBS declined to comment for this post. Verizon didn’t respond to request for comment.
In a lawsuit filed yesterday in Delaware Chancery Court, CBS sought an injunction to prevent National Amusements from “interfering” with Thursday’s special meeting of the CBS Board of Directors where a dividend that would weaken National Amusements’ voting interest in CBS from about 79% to 17% is expected to be passed.
The suit also seeks a temporary restraining order to prevent National Amusements, which is controlled by Shari and Sumer Redstone, from replacing members of CBS’ board ahead of the meeting. CBS formed the Special Committee after Shari Redstone asked CBS to consider merging with Viacom, an idea she first broached in 2016 but later abandoned.
“Ms. Redstone has acted to undermine CBS’s highly lauded and successful management team in a series of escalating attacks, including by talking to potential CEO replacements without Board approval and deriding executives,” the filing says. “In again proposing a CBS/Viacom merger in 2018, Ms. Redstone has not only refused to agree to typical public company governance, but also improperly interjected herself into negotiations.”
Shari Redstone has been trying to reunite the two halves of their media empire CBS and Viacom, which they split up in 2006 because Sumner Redstone thought at the time that Viacom was holding CBS back. Ironically, the opposite proved true as Viacom was hurt for years by declining ratings at its cable television networks and underperformance of its Paramount studio, which hasn’t turned a profit since the 2015 fiscal year.
Though Viacom’s performance has improved under Chief Executive Bob Bakish, the company remains a work in progress. CBS CEO Les Moonves reportedly is balking at efforts by Shari Redstone to give Bakish a role in the merged company which Moonves will lead.
National Amusements, for its part “is outraged by the action taken by CBS” and denied it planned to replace CBS’ board or force the company to accept a deal that it didn’t want, according to a statement.
Note: I do freelance work for CBSNews.com.
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