CBS Corporation's $12bn Acquisition of Viacom Inc.

By Marcus Falck and Oscar Kock (Stockholm School of Economics), Orlando Poraqi and Alessandro Carleo (Bocconi University) - Date: 10/11/2019

Overview of the Deal:

  • Acquirer: CBS Corporation (CBS US)

  • Target: Viacom Inc. (VIA US)

  • Transaction Value: $12bn

  • Announcement Date: 13th August 2019

  • Acquirer Advisors: Goldman Sachs, JP Morgan, Moelis & Co, Lazard Ltd, Centerview Partners LLC

  • Target Advisors: Morgan Stanley, Evercore Partners Inc., LionTree Advisors LLC

Back in 2016, National Amusements – a theater company and mass media holding company, published a letter it has sent to Viacom and CBS. It recommended the two companies to merge – considering a possible reunion a decade after the companies got separated. National Amusements controls around 80% of the voting shares of both Viacom and CBS and is privately owned by Sumner Redstone and his daughter Shari Redstone.

“We believe that a combination of CBS and Viacom might offer substantial synergies that would allow the combined company to respond (…) to the challenges of the changing entertainment and media landscape. (…) we would like both companies’ boards to consider a potential re-combination of the companies.” - National Amusements letter to CBS and Viacom

In fact, 13 years after the entertainment empire was split in two, Viacom and CBS managed to find an agreement to re-merge, the latest in a recent rash of entertainment industry megadeals.

“The optimal structure would be an all-stock transaction in which the stockholders of each company would receive shares in the combined company of the same class as they currently hold.” - National Amusements letter to CBS and Viacom

The deal was announced on August 13 this year and structured as an all-stock merger, where each of Viacom’s Class A voting share and Class B non-voting share converts into 0.59625 Class A voting share and Class B non-voting share of CBS, respectively. Thus, giving the shareholders of CBS 61% and Viacom shareholders 39% ownership of the new company, ViacomCBS Inc.. The transaction, expected to close in the end of 2019, will result in a combined entity with more than $28bn in revenue and a market capitalization of approximately $30bn.

Viacom and CBS laid out the strategic rationale for the merger arguing that the re-merged media company as a whole would be in better shape to survive the cable TV cord-cutting that has undermined the industry's economics, and to produce content for buyers like Netflix and Amazon.

Company Details (Acquirer – CBS Corp.)

CBS Corporation (NYSE:CBS) is a US-based multinational media company which operates broadcasting, television production, and publishing businesses. More precisely, CBS operates television and radio stations, produces and syndicates television programs, publishes books, provides online content, as well as outdoor advertising Customer Resource Management (CRM) solutions for enterprises.

- Founded in January 2006

-Co-President & Acting CEO: Joseph Ianiello

- Co-President & Chief Advertising Revenue Officer: Jo Ann Ross

- Chief Technology Officer: Philip R Wiser

- Number of employees: 12,700

- Market Cap: $13.911bn - EV: $24.07bn

- TTM Revenue: $15.26bn - LTM EBITDA: $3.63bn

- EV/Revenue: 1.58x - EV/EBITDA: 7.71x

Company Details (Target – Viacom Inc.)

Viacom Inc. produces media entertainment content. The Company creates and acquires programming for television, the Internet, mobile devices, video games, and other consumer electronics products. Viacom also produces, finances, and distributes motion pictures to movie theatres and on DVDs, television, digital and other platforms internationally.