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Is CBS-Viacom merger marriage getting closer?

CBS (CBS) and Viacom (VIA) reunion surface again. For years, the two media companies — CBS and Viacom – have been linked as potential merger partners. The two media companies, which were separated more than ten years ago by media mogul Sumner Redstone, are again taking initiatives towards exploring a potential merger as they finally settle on some serious negotiations. Latest reports suggest that CBS is working on its proposal to merge with Viacom. According to Reuters, CBS is set to make an offer that is way below the Viacom’s current market valuation.

Of late, there has been a wave of mergers and acquisitions in the U.S. media industry. This rise could be partly because the companies are beginning to admit the reality that bigger is better when it comes to competing in the rapidly changing media landscape and also to meet their targets. And with the unstoppable rise in the digital world, media companies bet on striking deals.

Both the companies are controlled by Sumner Redstone and his daughter Shari. In fact, the plan to consolidate CBS and Viacom was recommended by Shari in 2016 – who then comprehended the amplifying risk from the internet. But the plan failed and never progressed beyond initial talks. Both the companies had never had serious discussions on pricing.

CBS- famous for its megahit sitcom Big Band Theory- on its own has been performing well, whereas, Viacom — the owner of MTV and Comedy Central — has been struggling to improve ratings and revenue.

This all stock-bid for Viacom from CBS raised a few eyebrows because Viacom had worked towards boosting its association with cable and satellite providers. This was viewed as a positive development for the company. Considering this, the analyst expects CBS to pay a premium for Viacom. Even in 2016, Viacom shareholders had demanded a premium price. Will Viacom accept the offer is something we need to watch?

When the market closed today CBS stock was up 4%, while Viacom stock fell 6%

According to reports by Bloomberg, CBS in its proposal demands that CEO Leslie Moonves, who was instrumental in taking CBS to new heights after the split – should continue to manage the combined firm for a couple of years.  A special committee was set up in February to explore the merger.

It looks like this deal would be an interesting one as the two companies would only grow bigger and have an upper hand in negotiating prices with service providers – like Comcast (CMCSA) and Dish Network (DISH). This merger would give the combined entity a pricing leverage. When the market closed today CBS stock was up 4%, while Viacom stock fell 6%.

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