CBS (NYSE:CBS) and Viacom (NASDAQ:VIAB) have agreed to merge, ending a three-year-old drama filled with starts and stops that reunite the two companies controlled by Shari Redstone’s National Amusements holding company.
Redstone explicitly wants to get bigger faster, according to reports. Some of what caused the CBS-Viacom deal to drag along all year was figuring out which board members would stay with the combined company and getting those people focused on the new company’s direction.
CBS has a market capitalization of about $18 billion. At an agreed upon exchange ratio of .59625, Viacom is valued at about $12 billion. A combined company will have an enterprise value of about $50 billion.
That still puts CBS-Viacom at a significant balance sheet disadvantage when it comes to borrowing for content spending on original programming and sports rights relative to competitors AT&T/Warner Media (NYSE:T) (enterprise value = $453 billion), Disney (NYSE: DIS) (enterprise value = $315 billion), and Comcast/NBC Universal (NASDAQ:CMCSA) (enterprise value = $305 billion).
Redstone loves sports rights, and Discovery is a major player in European sports, owning exclusive rights to games in many European markets including pan-European television sports network EuroSport. Discovery also struck a deal with the PGA Tour for international rights and a golf streaming service last year for $2 billion.
Moreover, Discovery outbid Viacom for Scripps Networks Interactive in 2017 -- a $12 billion acquisition for the owner of HGTV, Travel Channel and Food Network. New CEO Bob Bakish’s interest in Scripps at the time may suggest he’d be interested in a combination once again.
CBS shares subtracted $2.56, or 5.3%, to $46.14, while Viacom sank $1.53, or 5.2% to $27.68
