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CBS and Viacom Deal Strike for Long-Thwarted Merger



CBS Corp. and Viacom Inc. Agreed to merge, a deal to the media companies hope to be stronger on the market.

The all-stock deal, if completed, will reunite the media empire of mogul Sumner Redstone, who had split up CBS and Viacom in 2006. It will create a major entertainment player valued at roughly $ 30 billion, combining Viacom properties such as MTV, Nickelodeon , Comedy Central and the Paramount movie and TV studio with CBS 's broadcast network and Showtime premium network.

The companies are betting now that they will help you

            Walt Disney
Co.

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            Comcast
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            AT & T
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and Netflix Inc. and remaindered as consumers of TVs.

Shari Redstone, Mr. Redstone's daughter and vice chair of both companies, will become chair of the combined company. The deal would cement Ms. Redstone's status as a powerful media mogul.

She controls both CBS and Viacom along with her father, through their family holding company National Amusements Inc.

Bob Bakish,

       currently chief executive of Viacom, would become CEO of the combined entity, while CBS Acting Chief Executive

      Joe Ianniello

       would run CBS-branded assets.

The deal values ​​Viacom at around $ 11.8 trillion, roughly on by its current market valuation. They will receive 0.59625 CBS share for each share they own. Viacom has been the weaker of the two media companies over the years, and its stock has risen this year, in part on speculation of a CBS deal.

Under the terms of the agreement, CBS will receive six seats on the 13-member board and Viacom will get four. National Amusements will get two board seats. Mr. Bakish will also get a board seat.

ViacomCBS would have a different stable of programming. Viacom brings to the table about 20 cable networks, including a handful of large ones, while CBS has its flagship broadcast network and premium channel Showtime.

That collection of networks could provide greater value in dealing with pay-TV providers, many of which have taken a toll with TV programmers as cord-cutters of the traditional cable bundle. CBS has the rights to air National Football League games through 2022, giving the combined entity a valuable bargaining chip since live sports continues to be one of the major draws of cable TV.

Viacom's biggest rivals have struck major deals over the past several years. NBCUniversal sold to cable giant Comcast and, more recently, Time Warner Inc. sold to AT & T, while Disney acquired the bulk of 21st Century Fox.

ViacomCBS would still be a relative minnow, with a much smaller market capitalization than big industry players. It would be necessary to make additional deals to bulk up the size of its rivals.

The bigger media companies have some major advantages. Disney, for example, has a fabled trove of intellectual property and a variety of assets-from theme parks to cable networks to movie franchises. Netflix has a seemingly insurmountable lead in streaming-video subscriptions, with 150 million paying users globally.

Disney, Comcast and AT & T are all trying to take care of their own online streaming services. CBS has its own service, CBS All Access. But CBS and Viacom are both big suppliers to Netflix and other digital players.

Between their various production outfits and channels, ViacomCBS would have a combined library of 140,000 episodes of premium TV and 3,600 movie titles, the companies said. Some 750 series are ordered or in production. ViacomCBS would be one of the top spenders on programming, with over $ 13 billion spent over the past 12 months.

Beneath Mr. Bakish will be an executive team responsible for overseeing the company's combined cable network, broadcast network, television production studios, its direct-to-consumer streaming services, movie studio and advertising sales divisions.

Christina Spade, chief financial officer of CBS, will become CFO of ViacomCBS. Crista D'Alimonte, general counsel of Viacom, will be general counsel.

David Nevins,

       the chief creative officer of CBS, will continue in his current role.

      Jim Lanzone,

       the president and chief executive of CBS Interactive, will retain that title.

ViacomCBS would seek $ 500 million in annual synergies, according to the companies.

The companies may have to navigate some cultural challenges. CBS is the stronger player, but Viacom's leader will be the CEO. Directors at CBS and Viacom have been explored for several years.

The first merger attempt, in late 2016, was called off to a lack of enthusiasm on the part of both companies. The second attempt, in 2018, led to a prolonged legal battle between National Amusements and CBS over the future of the company. CBS, under then-CEO

      Leslie Moonves,

       A Redeemable Thinking It Would Be a Dilute National Amusements' Voting Stake.

National Amusements resisted the change and the argument went to court. Under a settlement reached last September, Ms. Redstone emerged with her control intact, and the board of CBS underwent a significant overhaul; new directors who were joined to the board. Mr. Moonves was forced out after many people accused of sexual assault and harassment. Mr. Moonves has denied accusations of nonconsensual sexual relations.

Ms. Redstone is unique among media moguls in the role she exercises influence over CBS and Viacom. Her power is concentrated in a company that is technically controlled by her father. The 96-year-old Mr. Redstone owns 80% of the voting shares of National Amusements, which owns holding controlling stakes in CBS and Viacom.

Ms. Redstone has had a complicated relationship with her father over the years-at times, she seemed to be favoring heir, while at other times they were feuded. But a few years ago, as his health deteriorated, she rose to prominence in the empire and took effective control.

The holding company's bylaws were amended in 2016 to make clear that Mr. Redstone had a single vote among seven NAI directors in decisions tied to Viacom and CBS stakes.

The deal reverses a move, made in 2006, to split up CBS and Viacom. That cleaved Viacom's then-booming cable networks division from CBS's more mature TV business. Mr. Redstone, concerned that the stock company has stagnated, one of the analysts dubbed "ViaGrow" (referring to Viacom) and "ViaSlow" (a tongue-in-cheek reference to CBS) .

But the narrative flipped over the years as CBS's prospects grew brighter while Viacom's dimmed. CBS, fueled by hit shows and subscription TV revenues, was more resilient as consumers cable TV in larger numbers. By contrast, Viacom suffered major ratings, and led to battles with its distributors.

Viacom's weakness relative to CBS has been one of the major sticking points for CBS directors in recent years when the two companies explored a merger. CBS executives were fearful of being saddled with fading cable channels that would hamper their ability to negotiate with TV distributors.

Write to Benjamin Mullin at Benjamin.Mullin@wsj.com and Cara Lombardo at cara.lombardo@wsj.com

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